From: Douglas Grandt answerthecall@mac.

com
Subject:Ultimately, you have less and less room to maneuver. Check mate!
Date:June 6, 2019 at 7:57 PM
To:Darren W. Woods Darren.W.Woods@ExxonMobil.com, Neil A. Hansen neil.a.hansen@exxonmobil.com, Theodore J. Wojnar
theodore.j.wojnar@exxonmobil.com, Suzanne M. McCarron Suzanne.M.McCarron@ExxonMobil.com, Max Schulz
max.schulz@exxonmobil.com, Lisa Murkowski senator_murkowski@murkowski.senate.gov
Cc: Senator Bernie Sanders info@sanders.senate.gov, Katie Thomas (Sen.Sanders) katie_thomas@sanders.senate.gov,
Hinch, Ethan (Sanders) Ethan_Hinch@sanders.senate.gov

"Houston, we have a problem."

Irving, ExxonMobil has a problem!
Lisa Murkowski has a conundrum!
Neither of you has an endgame!
Who you gonna call? Oil Busters?

As Permian oil production turns

lighter, price outlook darkens
Devika Krishna Kumar Laila Kearney | Reuters | June 6, 2019 | Bit.ly/Reuters6Jun19

NEW YORK (Reuters) - The United States may now be the world’s biggest
crude producer, but the oil being produced in its prolific Permian basin is
increasingly too light in density for domestic refiners or for exports, eroding
prices for these orphan barrels.
Over the past year, production from the Permian in West Texas and New Mexico
Over the past year, production from the Permian in West Texas and New Mexico
has changed, with more super-light oil being extracted, as producers focus
drilling in the western part of the basin.
As those volumes increase and heavy crude supplies shrink, refiners are
grappling with the mismatch in the density of oil they require and what the
country produces, traders said.
U.S. refineries, geared to mostly process heavier and medium crudes that are
imported from neighboring producers, are struggling to blend the lighter oil
efficiently, market sources said.
That problem has grown more acute this year with heavier crude in short supply
after U.S. sanctions on Venezuela, production declines in Mexico and
transportation bottlenecks in Canada.
“That’s a big structural problem that’s not going to go away anytime soon.
We’ve got this mismatch in the country,” Jennifer Rowland, analyst with
Edward Jones said.
“We’ve got refineries that want heavy oil and producers that make light oil.”
As weekly U.S. crude production jumped to over 12 million barrels per day
(bpd) earlier this year, exports too soared to a record at 3.6 million bpd in week
to Feb. 15, government data showed.
However, the export market for super-light crude has so far been limited, traders
said, because there are only a few condensate splitters, or simple refineries
designed to handle light crude, in Europe, along with Asian petrochemical plants
that could process the grades.

THREE TIERED-SYSTEM
The amount of super-light oil produced in the Permian basin is swelling, creating
three distinct markets in the heart of the U.S. shale boom, as the newer grades
are trading at varying levels of discounts compared with the benchmark U.S.
light crude futures , market sources said.
So far, there are actively traded markets for two distinct grades - West Texas
Intermediate at Midland (WTI Midland) - the barrel most associated with the
Permian - and West Texas Light (WTL), produced in the western Delaware sub-
basin of the Permian. WTL is so light that it is nearly considered condensate, a
type of oil that generally requires blending with very heavy crude for U.S.
refiners to process it.
Other grades are not far behind. Plains All American’s Senior Vice President
Jeremy Goebel said at a Houston conference two weeks ago that in two months’
time, the market will likely start trading West Texas Condensate (WTC), an even
lighter oil than WTL.
The Permian’s typical crude barrel has an API gravity, a measure of density in
oil, of about 38 to 42 degrees. The higher the number, the lighter the oil.
Over the past year, volumes of WTL, with an API gravity of 44 to 50 degrees,
have risen, now making up nearly 10% of the Permian’s production as drilling
grows in the Delaware Basin, thanks to cost declines and more pipelines
additions. WTC has an API greater than 50 degrees.
“With a greater number of active rigs, growth in the Delaware will continue to
outpace that in the Midland,” which will boost supplies of discounted WTL,
Drillinginfo said in an April blog post.
WTI Midland has traded at an average of $3 a barrel below benchmark futures
over the past two months, Refinitiv Eikon data showed. WTL trades even lower
than that, fetching an average of $1.60 per barrel below WTI Midland, according
to data from price reporting agency Argus Media.

“What we’re seeing in the Permian these days is, we’re getting into a three-tiered
system on WTI - we’re starting to see WTI regular, WTI light and WTI
condensate, for lack of a better word,” HollyFrontier Corp’s Senior Vice
President Thomas Creery said on an earnings call last month.
The three grades historically have not traded with a large discount between them
because many of those barrels were being blended with other grades, David
Lamp, chief executive of CVR Energy Inc said in an earnings call late in April,
but that is starting to end, he said, because of fewer markets for those barrels so
far.
“Ultimately, these (discounts) continue to spread as more and more lights are
produced, and they have less and less places to go,” Lamp said.

https://www.reuters.com/article/us-usa-oil-permian/as-permian-oil-production-turns-
lighter-price-outlook-darkens-idUSKCN1T71B7