Growing Permian production and tight pipeline capacity saw Midland-WTI spreads widen in 2018. Permian production rose from 0.4 million barrels per day (MM bbl/d) in 2010 to 2.05MM bbl/d in 2017. However, in 2018, production did not increase as quickly as previous years due to infrastructure constraints (i.e., oil pipelines, associated gas processing, NGL and gas pipeline infrastructure, and water infrastructure for fracking operations, etc.).
Moving forward, Solomon expects continued expansion of oil pipeline capacity to exceed production; however, the ability of refining capability to handle light barrels has started to reach its limits, shifting the bottleneck toward very large crude carrier (VLCC) export capabilities.