Confusion is still lingering in and around the Permian Basin. How bad is the situation in Saudi Arabia? How long will it last? Will gas prices continue to increase? There are still a lot of unanswered questions, but things are most likely to improve for the oil industry in the Permian Basin.
Oil prices have recently spiked due to situations in the Middle East. Attacks made on Saudia Arabian oil facilities led to the loss of approximately 5.7 million barrels per day of capacity, half of the country’s total output.
President Donald Trump tweeted that the U.S. would tap into its Strategic Petroleum Reserve “if needed, in a to-be-determined amount, sufficient to keep the markets well-supplied.” It is a concern that these global tensions could potentially threaten the international market if instability continues to grow.
What does this mean for the Permian Basin?
A major oil and gas company in the Permian Basin announced an open season for shippers of crude oil looking to move product from southeast New Mexico into West Texas, and then to the export market in the Gulf Coast. Designed to carry 480,000 barrels of crude oil and condensate per day, ExxonMobil’s Delaware Connector pipeline will travel production from areas in Eddy County to the company’s terminal in Wink, Texas.
This open season is scheduled to run from September 13th to October 14th, ExxonMobil wrote in a recent news release. This 65-mile pipeline is intended to support ongoing production growth in the Permian Basin, with additional access to Gulf Coast refineries. This will result in crude oil able to be piped, trucked, or shipped via rail to the Gulf Coast from the Wink Terminal.
What about Gas Prices?
The price of domestic oil hit one of its highest points all year, with West Texas Intermediate – a grade of crude used as a benchmark for U.S. prices – was trading at about $62 per barrel as of Monday. This recent spike was brought on by the recent Saudi Arabia attack. Additionally, oil futures went up as much as $11.73 to $71.95, the largest jump since 1988.
“Once we figure out exactly how bad this could be, you’re going to see gas prices respond to the increase in oil prices. There will be some disconnect, but it’s going to start to happen,” local financial advisor Karl Rundgren said.
This attack only strengthens the belief that Texas needs to be an independent energy producer. Many believe we can no longer base our entire industrial economy on the instability of the Middle East.