The average refiner acquisition cost of crude oil is expected to remain relatively flat, averaging about $100 per barrel, in 2011 and 2012, the Energy Information Administration (EIA) reported in the Nov. 8 Short-Term Energy Outlook.
The value of West Texas Intermediate (WTI) benchmark crude was about $11 per barrel below the U.S. refiner acquisition cost of crude oil in the third quarter of this year, the Outlook noted.
West Texas Intermediate crude oil spot prices fell from an average of $110 per barrel in April to $86 per barrel in August, and remained near this level through October.
Some background: For most of the last 30 years, WTI has traded at a premium over the average U.S. refiner acquisition cost of crude oil. However, the growth in crude oil supply, particularly from Canada and North Dakota, to the midcontinent region where WTI is traded, has not yet been matched by increases in transportation capacity out of the Midwest to the refining centers, such as the Gulf Coast. This transportation bottleneck contributes to the large price discount for WTI relative to other U.S. and world crude oils. After reaching a record price discount in the third quarter of this year, the discount for WTI is now expected to diminish modestly as the flow of crude oil out of the mid-continent region increases.
The forecast WTI price discount narrows to $8 per barrel by the fourth quarter of 2012, as rail and truck capacity is added to the region.
Also from the Outlook:
• EIA’s U.S. and world economic growth assumptions have been lowered from last month’s Outlook. World oil-consumption-weighted real GDP grows by 3.1 percent in 2012, compared with 3.5 percent in the previous Outlook.
• Regular-grade gasoline retail prices have fallen by 46 cents per gallon from their peak monthly average this year of $3.91 per gallon for May to $3.45 per gallon for October. This drop in prices results from falling crude oil prices as well as the normal seasonal decline in consumption and the switch in production from summer-grade gasoline to lower-cost winter-grade gasoline. EIA projects gasoline retail prices to continue to decline, albeit slightly, through the end of the year.