Bakken oil’s discount to West Texas Intermediate plunged to its lowest level in almost four months before Hurricane Sandy’s landfall, as East Coast refineries that process the grade cut output and railways slowed shipments.
Bakken fell $6.50 to a $10-a-barrel-discount against WTI at 3:12 p.m. New York time, its widest discount since July 5, according to data compiled by Bloomberg. Shut-downs affecting eastern railways are slowing Bakken rail shipments, a spokeswoman for western train operator BNSF said.
“There are some issues getting crudes to the eastern railroads,” said Krista York-Wooley, a BNSF Railway Co. spokeswoman. “They have had to shut down certain routes.”
York-Wooley said BNSF ships between 40 and 45 percent of the crude oil produced in the Bakken region in North Dakota and Montana, and hasn’t yet seen any backups on its system.
Several East Coast refiners shut down or reduced output, including Phillips 66, PBF Energy Inc., Hess Corp. and Philadelphia Energy Solutions.
PBF Energy Inc. reduced production at its 182,200 barrel-a-day Delaware City, Delaware, refinery, the company said today. PBF estimated it will ship 1,900 rail carloads a month of oil to the Delaware plant offloading terminal during the fourth quarter, according to a confidential PBF report obtained by Bloomberg Sept. 18.
Rail cars shipped 46 percent of Bakken crude in August, according to the North Dakota Pipeline Authority.
Hurricane Sandy’s center is expected to make landfall later today on the southern New Jersey coast near Atlantic City, according to the National Hurricane Center. Hurricane-force winds and coastal storm surges are expected from Virginia to Massachusetts.
Gulf of Mexico crude grades gained as Brent widened its premium over WTI for a sixth consecutive day. Brent, the global benchmark crude, rose 54 cents to $23.81 a barrel over WTI, the U.S. benchmark. When Brent’s premium to WTI increases, the cost of alternatives such as Gulf crudes tend to rise as well.
Light Louisiana Sweet increased $1.30 to $22.30 a barrel over WTI, while Heavy Louisiana Sweet gained $1.80 to a $22.30 premium.