America Is Producing the Wrong Kind of Oil
https://www.bloomberg.com/news/articles/2019-02-01/the-great-oil-paradox-too-many-good-crudes-not-enough-bad-onesThe shale boom has created a world awash with crude, putting a lid on prices and markedly reducing U.S. dependence on imported energy. But there’s a growing problem: America is producing the wrong kind of oil.
Texas and other shale-rich states are spewing a gusher of high-quality crude -- light-sweet in the industry parlance -- feeding a growing glut that’s bending the global oil industry out of shape.
Refiners who invested billions to turn a profit from processing cheap low-quality crude are paying unheard of premiums to find the heavy-sour grades they need. The mismatch is better news for OPEC producers like Iraq and Saudi Arabia, who don’t produce much light-sweet, but pump plenty of the dirtier stuff.
The crisis is Venezuela, together with OPEC output cuts, will exacerbate the mismatch. The South American producer exports some of the world’s heaviest oil and Trump administration sanctions announced this week will make processing and exporting crude far more difficult. American refiners are scrambling for alternative supplies at very short notice.
"We still have some holes in our supply plan" over the next 30 days, Gary Simmons, a senior executive at Valero Energy Corp., the largest refiner in the U.S., told investors on Thursday. "We are not taking anything from Venezuela."
Crude isn’t the same everywhere: the kind pumped from the shale wells of West Texas resembles cooking oil -- thin and easy to refine. In Venezuela’s Orinoco region, it looks more like marmalade, thick and hard to process. Density isn’t the only difference -- the sulfur content is also important, dividing the market into sweet and sour crude. Heavy crude tends to have more sulfur than light crude....