U.S. Midwest crude oil supply growth of nearly 100% or 808,000 barrels per day (b/d), combined with inadequate demand growth, will result in oversupply, transportation constraints and deeply depressed prices in the region.

 BENTEK Energy, a leading energy markets information and analytics company, today announced the availability of the PADD 2 (Midwest) section of its Crude Awakening: Shale Boom Hits Oil Market Alert, which forecasts that Midwest crude oil supply will double during the 2011-16 period, growing nearly 808,000 b/d by 2016. BENTEK projects the production growth will include increases of 547,000 b/d in the Williston-ND, 97,000 b/d in the Anadarko and 131,000 b/d in the Utica (Appalachia-OH). Despite these massive supply gains and six currently announced Midwest refinery expansions, crude oil demand from regional refineries is projected to grow only 3% or 108,000 b/d during this time. Transportation projects such as the Seaway and Keystone XL pipelines are expected to provide only temporary relief to ongoing oversupply conditions. Consequently, regional oil prices are projected to remain deeply depressed.

Given increasingly tight and oversupplied Midwest market dynamics, West Texas Intermediate (WTI) to Brent crude oil price differentials will be wide and volatile over the next five years. BENTEK's Crude Awakening: Shale Boom Hits Oil reveals that the WTI-Brent crude oil price differential will average minus $14 over the next five years. That compares to the current WTI futures discount to Brent (2012-16) of roughly minus $7.40. BENTEK forecasts WTI tumbling to a discount of nearly minus $18 this year before rebounding in 2013 and 2014 in response to key pipeline expansions between Cushing, OK, and the U.S. Gulf Coast, particularly the Seaway Pipeline. Despite these capacity additions, supply growth is expected to substantially outpace pipeline and refinery increases and lead to the return of deep WTI price discounts to Brent in 2015 and 2016.

"Unprecedented increases in Midwest supply and distressed regional prices are leading to a growing incentive to move more crude oil from the Midwest to the Gulf Coast," noted BENTEK Senior Director, Energy Analysis, Adam Bedard. "Over the next five years, oil flows that traditionally moved from the Gulf Coast to Cushing, OK, and the Midwest will reverse directions and head south, which will lead to major changes in national and regional oil prices. However, due to the massive amount of supply anticipated, pipelines such as Seaway and Keystone XL that are being built to tie these two regions together will only provide temporary relief to low prices at Cushing."

BENTEK's Market Alert, Crude Awakening: Shale Boom Hits Oil, provides a comprehensive review of the U.S. oil market and its potential growth over the next five years, including industry challenges and implications. This Market Alert details current drilling and production activity in the most active U.S. and Canadian oil plays, including five-year production forecasts. The PADD 2 section of Crude Awakening: Shale Boom Hits Oil includes in-depth analysis on historical and projected Midwest oil supply and trends in key production areas such as the Williston, Anadarko and Utica. Analysis on existing and future Midwest transportation infrastructure, regional demand and a five-year WTI market outlook is also included, providing extensive analysis at the most fundamental level available in the marketplace today.

RRMcD