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A Perfectly Positioned E+P Company

By Dan Dicker | Mon, 01 April 2013 16:30 | 0

Slowly, we’ve seen a price rise in West Texas Intermediate crude, now approaching $100 a barrel. This rally has come while the global benchmark for crude prices, Brent crude, hasn’t really moved much at all, remaining fairly firm at around $109.  A flat price for global crude with a rising price for US crude has been just the opposite of what the fundamentals seem to say, with a dropping supply profile for Brent crudes and a continuing surplus of domestic crude in Cushing, Oklahoma. 

But there are reasons why what we think we see isn’t what’s actually happening.  On the European side, Cyprus bank issues have shown just how problematic Europe remains, sitting almost always on the edge of a new recessionary event (or worse).  And here in the US, there are new options for relieving the surplus of crude flooding the Gulf Coast from tight oil plays and Canadian sands, both in increasing transport of crude by rail and by the now better logistical activity of the Seaway pipeline. 

All of this to say that I think the conversion, or ‘catching up’ of West Texas Intermediate prices to the rest of global crude pricing is going to continue, even if they’re not about to hit parity anytime soon. 

For stocks, that means that some E+P companies that concentrate on domestic crude production are about to get delivered a premium as compared to those that have producing assets all around the globe. …

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