Bakken fields in North Dakota and Montana produce more crude than any US basin outside of Texas and New Mexico. Yet there has been limited price transparency in the physical trade of Bakken crude. This limited physical transparency has prevented exchanges from providing actively traded financial contracts – and that has made hedging more expensive, planning more difficult, and investment less attractive than it could be.
How can Bakken trade be more transparent? The answer lies in illuminating trade at pipeline hubs from North Dakota injection points for the Dakota Access Pipeline (DAPL), to midcontinent logistical hubs such as Clearbrook, Patoka and Cushing, to the coastal trading hub at Nederland/Beaumont, Texas.
Since the launch of the DAPL pipeline in 2017, roughly 80pc of Bakken crude moves to market by pipeline. Capturing a broad, representative sample of spot physical trade at the pipeline hubs is the key to transparency.
Argus began publishing a daily price for Bakken crude at Clearbrook, MN in 2011, adding Bakken at Cushing in 2016, Bakken at Nederland on the Texas coast in 2017, and a dockside fob price for Bakken at the Gulf coast in 2018. In 2022, Argus launched published price assessments for Bakken traded at North Dakota injection points to the Dakota Access Pipeline (DAPL) and at the Patoka, Illinois pipeline hub.
How Argus covers the Bakken markets:
Argus daily published prices are set by a volume-weighted average of all trades reported to us at each hub during the trading day. Clearbrook is the exception, where Argus publishes only high and low prices for the day. Brokers, marketers and traders voluntarily report their trades to Argus in order to facilitate Argus publishing a nightly volume-weighted average price. Argus also publishes the high and low price traded or achievable that day. At DAPL, Patoka and Guernsey, Argus publishes a cumulative volume-weighted average price of all trades done since the beginning of the trade month.
The Argus method of collecting voluntarily reported trade has led to the most robust physical and transparent crude markets in the world. In Permian WTI markets at Midland and Houston, Argus gets nearly 2mn b/d of reported trades, and financial contracts with hundreds of millions of barrels of open interest settle on the Argus physical prices. In the Bakken, as of the February 2023 trade month, Argus was getting about 400,000 b/d of reported trade, divided between Cushing, DAPL and Patoka. At Guernsey, Argus was receiving between 40,000-60,000 b/d of reported trade on light sweet crude.
When there are no trades done and reported to Argus at a location on a given day, Argus will assess the price that could have been achieved at that location on that day based on bids, offers, fundamental news and trade on related markets.
Reading the price table
Argus-published Bakken assessments are based on spot trade for delivery in the prompt month (timing). At DAPL, Patoka and Clearbrook our Bakken daily prices are stated as a differential to the calendar month average (CMA) price for Nymex light sweet crude futures at Cushing (basis). At Cushing the price is a differential to the Argus WTI Formula price (WTI) basis, and in the case of Bakken traded at the Nederland/Beaumont pipeline hub, the basis price is the Nymex CMA + the Argus “diff to CMA” (for more information on Argus diff to CMA, click here). At Clearbrook, Argus publishes high and low prices for the day, but does not publish a daily volume-weighted average price. This reflects the markets as they trade.
Source: Argus Americas Crude, 25 January 2023, p2
