Bakken Crude Slides to 15-Month Low as Refinery Work Cuts Demand

Bakken crude weakened to the lowest level in more than 15 months as Canadian light oil production increased and refineries shut units for repairs.

The North Dakota oil delivered in Clearbrook, Minnesota, slid $2 to a discount of $12.50 a barrel versus U.S. benchmark West Texas Intermediate at 4:27 p.m. New York time, according to data compiled by Bloomberg, its lowest level since June 29, 2012. Bakken is a light, sweet crude that is shipped by pipeline to refiners in the mid-continent and by rail to plants along the coasts.

Output at the Syncrude upgrader in Alberta, which converts oil sands bitumen into light, sweet synthetic crude, rose 39 percent to 291,000 barrels a day in September from the previous month as it ramped up after maintenance, Canadian Oil Sands Ltd (COS), the project’s largest owner, said Oct. 1. Husky Energy Inc. (HSE) and Suncor Energy Inc. (SU) both planned to finish maintenance at Canadian upgraders this month.

Northern Tier Energy LP (NTI)’s St. Paul Park refinery in Minnesota shut the larger of two crude units after a Sept. 22 fire. The unit is expected to be down three to four weeks, the company said in a written statement.

The price of Bakken at Clearbrook fell to the biggest discount since February 2012 versus posted prices for Bakken crude in the field in North Dakota, an indicator of what shippers will pay producers, data compiled by Bloomberg show. The spread has dropped more than $5 a barrel since Sept. 30, when it was at a premium of $2.64 a barrel, to a discount of $2.88 a barrel today.

Bakken-Brent

The discount of Bakken posted prices compared with Dated Brent, the benchmark for crude imports from Europe, widened to $19.58 a barrel Sept. 26, before narrowing to $15.08 today. It costs about $12 to ship crude by rail to the Delaware City, Delaware, refinery from North Dakota, PBF Energy said last month.

“Because the arbitrage is so open, people can afford to start bidding up the price in western North Dakota,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “People are paying a price that makes sense to them so they can rail it out of the location, rather than have someone ship it by pipeline to Clearbrook.”

To contact the reporters on this story: Eliot Caroom in New York at ecaroom@bloomberg.net; Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.