Another important point for price discovery along the lines carrying Bakken crude is the growing storage hub and pipeline nexus at Guernsey, Wyoming. Not only has there been a steady rise in capacity on pipelines from the Bakken toward Guernsey, but the rapid growth in crude output from the Niobrara producing basin in the northern Rockies has brought new volumes of light, low-sulphur crude similar to Bakken in quality to Guernsey.
Like the Bakken, the Niobrara area comprising the northern tier of Colorado counties and the eastern half of Wyoming, saw significant shut-ins of production in the early months of the COVID pandemic in 2020. Also like Bakken, production in the Niobrara has begun to recover as global crude prices have stayed at historically strong levels (see chart below)
Niobrara (Rockies) production
Among the sub-basins in the Niobrara whose crude can access Guernsey are: Powder Horn, Big Horn, Wind River, Green River, Denver-Julesburg and Uinta-Piceance. Among the pipelines entering Guernsey hubs from these areas are: PRB, Thunderbird, Rocky Mountain/Big Horn, and the Express-Platte from Canada.
Bakken sourced pipelines entering Guernsey include: Butte, Bridger and Belle Fourche, as well as Kinder Morgan’s HH.
Guernsey, WY Area
Ft. Laramie, WY Area
How Argus assesses the daily price of Light Sweet at Guernsey:
In order to capture the most possible liquidity of trade for light crude in the Guernsey area, Argus will consider trades of four light grades at six area pipeline terminals in setting the nightly Argus index price. Trades for
- Light Sweet at Guernsey
- Rocky Mountain Sweet
- Powder River Sweet, and
- Bakken Light Sweet
will be included in the volume-weighted average of trades that sets the Argus index for Light Sweet at Guernsey. Therefore, Argus defines Guernsey Light Sweet as a light crude generally between 40-46 degrees API and < 0.3% sulphur – a quality specification that includes the four grades mentioned above.
Trades done at the following terminals will be included:
- True Companies Guernsey
- Plains Ft Laramie
- Kinder Morgan HH
- Enbridge Platte
- Tallgrass Pony Express
- Silver Creek/Tallgrass Powder River Gathering
In addition to reflecting the wide swath of light sweet crude liquidity in the Guernsey area, Argus’ light sweet Guernsey crude assessment reflects a more complete trade month than some previous indexes for light sweet crude in the area. Since most of the crude trading at – and passing through Guernsey – is headed toward the Cushing and US Gulf coast refining areas, Argus’ Guernsey assessment will “roll” according to US Gulf coast and Cushing pipeline scheduling dates. This means that the trade month will begin on the 26th of the second month before pipeline delivery and conclude on the 25th of the month before pipeline delivery. If the 26th is on a weekend or holiday, the next business day after the 26th.
For example, for Guernsey light sweet barrels to be delivered in December 2022, the prompt trade month will run from October 26th through November 23d (the last business day before the US Thanksgiving holiday). Trade for barrels to be delivered in January 2023 will begin on November 28th, the next business day after the 26th, which falls on a Saturday in November.
The price for light sweet crude at Guernsey is a useful reflection of market fundamentals including Niobrara and Bakken production, refinery demand in Cushing and the Gulf coast relative to US midcontinent demand, pipeline versus rail transportation costs, and several other factors. The Argus Guernsey Light Sweet crude price assessment provides a daily glimpse at how all of those factors are working together to determine the price for Rockies sweet crude.
The full published Argus methodology for light sweet crude at Guernsey is located at: https://www.argusmedia.com/-/media/Files/methodology/argus-americas-crude.ashx
