What Difference Does It Make? - How Crude Price Differentials Affect Producers

RBN Energy Blogcast

As the number of new COVID-19 cases continues to rise, so does the oil patch’s apprehension that crude oil prices could be poised to take another hit. If that happens, producers would have to review, yet again, their plans for optimizing production as best they can, given their pricing outlook. But producers do not all receive uniform prices reflecting NYMEX WTI for their physical barrels — far from it. Crude quality and proximity to a demand market can make a big difference in the price that the barrels will ultimately sell for. Price reporting agencies (PRAs) such as Argus and Platts track and publish these differentials. But how are those differentials calculated and how do they affect producers? Today, we discuss crude differentials and their impact.