Key to Keystone

Updated!!!

*U.S. SAID TO FIND KEYSTONE WON’T GREATLY BOOST OIL SANDS OUTPUT
*STATE DEPARTMENT BRIEFED U.S. HOUSE STAFF ON KEYSTONE REPORT

Looks like it’s going to happen before they legalize marijuana.

We hear that there will be a US State Dept. report out today on Keystone and we think that this is going to go through.  We surmise that the POTUS declined to talk about the amazing oil industry in the SOTU because he didn’t want to stir the pot.

If this does head closer to approval, we think that this is going to put pressure on the rail industry, but be a boon for pipeline activity.  For those Barrelheads that don’t watch the equities too closely, we want to revisit the fact that Warren (Railroad) Buffett took time to purchase Phillips 66 Specialty Fuels earlier this month.  Those specialty fuels are specific to helping move crude through pipelines.  I know this guy it an “oracle”, but a little inside information never hurt either.

Now if this does happen, we can start thinking about throwing a funeral ceremony for the Brent contract as we know it.  More Canadian heavy crude imports are going to help replace whatever (OPEC) crude barrels that are still coming into the US Gulf.  Since there’s no other benchmark to hedge foreign crude, the loss of more imports, no matter light or heavy, this contract will fade like a fart in the American wind.  <stronger WTI/weaker Brent>

As for Cushing, this may mean that even more pipeline flow is going to increase as barrels come into the US and move south.  We knew we were going to continue to see oil transplanted from Cushing to storage in the USG, but this hits the fast forward button.  <stronger backwardation in CL spreads>