RBN Energy: Pricing -- Brent, WTI, Alaska North Slope (California) --
WTI for prompt delivery closed $10.94/Bbl below Brent on Wednesday (October 23, 2013). Brent prices are disconnected from WTI and Light Louisiana Sweet because the Gulf Coast is awash with light sweet crude. West Coast crude prices on the other hand are supposed to march to a different tune – isolated from new shale and Canadian crude supplies and thus expected to continue tracking international Brent. But ANS prices on the West Coast have fallen to more than $5/Bbl below Brent in the past 2 weeks and seem to be tracking WTI. Is this just a temporary aberration or could it be signaling another step change in the road to US crude independence? Today we take a closer look at what’s going on.
US crude oil market analysis tends to be dominated by the spread between US domestic benchmark West Texas Intermediate (WTI) crude and international benchmark Brent – aka “The Spread”. However, the West Coast market is more concerned with pricing for the dominant grade consumed there - Alaska North Slope (ANS) crude. ANS is shipped to refineries in Washington State and California from the Valdez Marine Terminal at the southern end of the Trans Alaska Pipeline (TAPS). We have previously documented the decline in ANS crude production from its heyday 2MMb/d in the 1980’s to 520 Mb/d in 2012. ANS production has actually improved to average 528 Mb/d so far in 2013 but it remains on a slow downward trend. Without changes to existing regulations and increased production, ANS is destined to be a dwindling resource supplied only to West Coast refineries.
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A Note To The Granddaughters
Nostalgia is a funny thing. It stops me in my tracks. I have a lot of work each morning, getting caught up: tons of e-mail to get through, replying to folks with questions about the Bakken, updating wells that come off the confidential list, and reading stories sent to me readers. Which brings me to this.
I spent a lot of time in Yorkshire County, England, UK, between 2002 and 2007. I spent my weekends hiking throughout the countryside. Many of my favorite trips were to National Trust sites, a public trust that preserved historic British landmarks (castles, homes, estates, parks, etc). Don sent me a story today from AFP via Yahoo!News: the trust may consider fracking to develop natural gas under its holdings but will NEVER allow a wind turbine permit. If one spends any time thinking about the decision by the National Trust, it makes all kinds of sense. Funding is an incredible challenge for the trust, and royalties from natural gas must be very, very enticing. So, we will see.
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