North American Crude Oil Production

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North-American Crude Oil Production Unlike Brent, North American crude production is up amid a "shale oil revolution." To capture this fact, we use two variables published by the EIA. The first, CANADA, is the weekly amount of Canadian crude imported into the Petroleum Administration for Defense's Midwestern District ("PADD 2") where Cushing is located. The second, RIGS, is a monthly count of rotary rigs operating onand off-shore in the 50 United States. Both series increase steadily over most of our sample period, accelerating sharply from 2009 (RIGS) or 2011 (CANADA). Both variables should be inversely related to the spread: ceteris paribus, more North American supply should push down WTI's price—especially if the oil faces difficulties reaching international markets. Cushing Storage Capacity and Utilization As discussed above, Cushing infrastructure constraints have long influenced the price differential at which WTI trades against other sweet crudes. Before 2007, "the main logistical bottleneck was how to get enough oil into Cushing [which] in many instances resulted in [WTI] rising to very high levels [vs.] other benchmarks" (Fattouh, 2007, p.2). After February 2007, amid a greater now of crude oil from Montana, North Dakota and Canada, "the ability to shift this oil out of the region and to provide a relief valve for Cushing has been very limited" {ibid.). Post-2007, Cushing bottlenecks should ceteris paribus bring about more crude storage. As oil tanks get filled

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