Alaska Crude Prices Weaken as Refiners Increase Rail Shipments

Alaska North Slope crude weakened relative to Brent on the spot market as West Coast refineries bring more oil in by rail, reducing demand for other supplies.

ANS, a medium-density, high-sulfur crude produced off Alaska’s Arctic Coast, weakened by $1.49 to a discount of $5.60 a barrel to Dated Brent at 3:55 p.m., according to data compiled by Bloomberg.

About 524,000 barrels a day of ANS crude have been produced this month. Supplies are sent by pipeline to the Valdez Marine Terminal in south Alaska, where it’s delivered by tanker to U.S. West Coast refineries.

Refineries have been boosting supplies by rail from the middle of the U.S., where prices are cheaper. California railed in 1.39 million barrels over the first six months of the year, compared with 413,000 over that period in 2012, according to the state’s Energy Commission.

Phillips 66 (PSX) received permits to build a 30,000-barrels-a-day rail unloading facility at its Ferndale, Washington, refinery, the company said in its third-quarter earnings statement.

“Between what ourselves and others are doing on the West Coast, we’re going to pressure ANS prices until ANS, rather than being a Brent-based type crude, it becomes an advantaged crude,” Greg Garland, Phillips 66’s chief executive officer, said during a conference call today.

Bakken crude from North Dakota fits well at Phillips 66’s Ferndale plant and the Rodeo refining complex in northern California, Tim Taylor, executive vice president of commercial, transportation, business development and marketing, said in an interview after the call. Heavy Canadian crude, transported by rail, could be a direct substitution for heavy crudes on the West Coast, he said.

“The focus is really about which crudes make the most sense economically,” he said. “That’s really the way we’re trying to drive value, to bring inland crudes to the West Coast.”

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Bradley Olson in Houston at bradleyolson@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.