Slide 8 of 25
Notes:
- The industry’s bottoms conversion capacity available to convert the heavier parts
of crude oil (bottoms) to lighter, more higher valued products also can affect the
light-heavy crude oil differential. Bottoms conversion capacity reduces the production of
residual fuel oil.
- If the industry’s ability to upgrade heavy crudes is increasing, and heavy crude
supply is not increasing as rapidly, refiners produce less residual fuel and more light
products. Lower residual production reduces the volume of residual fuel on the market, and
gives residual fuel a higher market value relative to light products. This, in turn,
improves the value of heavy crude oil relative to light crude oil, i.e., narrowing the
light-heavy crude oil differential.
