Oct. 4 (UPI) — Oil prices lost ground Thursday morning after a rambunctious rally the day before.
WTI prices fell more than $1.50 in mid-day trading while Brent prices slipped more than $1.10 a barrel.
Analysts say the sudden drop in crude oil prices occurred because the United States had a large inventory build while, internationally, Saudi Arabia calmed fears by saying it had ample spare capacity.
“The market realizes that when we see a sharp drop in U.S. oil exports in one week, it usually rebounds hard the next week,” Phil Flynn, a senior market analyst with Price Futures Group, said Thursday.
The $10 spread between Brent and WTI prices still makes U.S. crude oil exports attractive to other countries.
The business activity index dipped slightly from the second quarter but the quarter remains among the highest since the survey began in 2016. The survey looked at 171 energy companies in September. That included exploration and production companies and oil and gas service companies.
Pipeline constraints in the Permian Basin was a hot topic, with 56 percent saying they expect the problem to be relieved by the end of 2019. Crude oil is selling at a discount in the Permian Basin because of the lack of pipelines. The survey showed 70 percent of respondents expect the discount, about $7 a barrel, to have a negative impact on development.
In North Dakota, Bakken Shale crude oil exports will be getting their own commodity price published by Argus.
The price will be for cargoes that originate in the Bakken Shale and are loaded onto tanker ships at Beaumont/Nederland in South Texas. The completion of Energy Transfer Partners’ 525,000 barrel per day Dakota Access Pipeline in June delivers more Bakken crude to the coast for exporting.
“Bakken and WTI have both developed as key waterborne markers in the U.S. Gulf Coast,” said Adrian Binks, Argus Media chairman and CEO. “And we anticipate continued price discovery into this uniquely diverse and growing crude export market.”
Company agrees to replace pipeline under Great Lakes
Enbridge Energy will pay $350 million to $500 million to build a tunnel for a new pipeline to replace the one that passes through the Straits of Mackinac. There are fears the pipeline could leak oil into the Great Lakes.
Canadian-based Enbridge estimates construction will take 10 years.
“The agreement protects the water of the Straits and the Great Lakes several ways, and makes a safe pipeline even safer,” Enbridge said in a statement. “The agreement with the state reflects Enbridge’s steadfast commitment to protecting the Great Lakes while safely meeting Michigan’s energy needs.”