COLUMN-Oil marketers ask: who will buy my crude? John Kemp

Fri Dec 21, 2012 8:15am EST
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By John Kemp

LONDON Dec 21 (Reuters) - Marketing production is more associated with technology and entertainment than grubby industrial raw materials like oil. But marketing is set to become more important as the oil market moves into surplus and struggles with an increasingly diverse range of crudes.

Crude marketers need to convince refiners their oil is worth paying a premium for and to undertake expensive investments to be able to process it.

Outlining its strategy to investors in October, Continental Resources, one of the leading producers in North Dakota's Bakken, devoted a third of its presentation to the importance of improving the marketing of its output to secure more recognition of its quality and achieve higher prices.

Continental promised a marketing strategy that would improve Bakken's value relative to other benchmarks by expanding access to coastal markets, increasing market recognition of the superior quality of Bakken oil, and establishing Bakken as the preferred source of supply. At the moment, Bakken crude is selling well below benchmarks like Brent and WTI because of transportation bottlenecks.

Continental has been busy adding transportation capacity by both pipeline and rail to carry its Bakken crude away from the oversupplied midcontinent market to coastal refineries who would be prepared to pay more for it.

But the company is also keen to convince refiners its crude is superior to competing conventional grades and more valuable than oils from rival shale plays such as Eagle Ford. Continental's full presentation is available on its website and is worth reading in full (slides 18, 32 and 86-105).