More CA Crude Comparisons

Notes:

• There are further indications that California was experiencing the same market pressures as the rest of the world. This chart shows Kern crude price behavior relative to several crude oils. It is important to point out that any one crude oil can move slightly differently at any point in time. WTI is well known for its variations due to pipeline problems, and more recently some storage limitations.

• But as a whole, the behavior of Kern relative to other crude oils has been consistent.

• Towards the end of 1997, the world was seeing a growing glut of all kinds of oil, but heavy crude in particular. California was not immune.
  • Preliminary data indicate California saw an increase in heavy crude imports of about 50 thousand barrels per day (MB/D) in the third quarter over the first six months -- most of which came from Mexico and South America other than Venezuela. Fourth quarter increased about 60 MB/D from first half -- with about 3/4 of the increase coming from Mexico and South American countries other than Venezuela. Canada and Venezuela accounted for most of the remainder of the fourth quarter increase. (Total imports for the year averaged about 170 MB/D.)
  • Reports indicated heavy Canadian crude oil was pushing Mexican, Venezuelan, and Saudi crudes out of PADD 2. These volumes had to find another home and some found buyers in California. But with the falling crude market, warm weather, and more heavy crude oil, California residual prices dropped below the weak resid market of the Gulf Coast.

• The good news is that the Mexicans are trying to raise the value of their Mayan crude oil by purchasing residual fuel, which is an important element of the Mayan pricing formula. This has helped to lift heavy prices in general.