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Sidebar: ANS oil disconnects
Alan Bailey Petroleum News
One feature of the recent turmoil in the global oil market is the disconnection of the price of North Slope crude oil from the benchmark Brent Crude price. The North Slope oil price has dropped below the Brent price to track more closely to the West Texas Intermediate benchmark for years Alaska North Slope oil has tracked close to the Brent index. And this price adjustment matters for the economics of the North Slope oil industry and Alaska state revenues, since WTI typically tracks at a lower price than Brent.
According to the Alaska Department of Revenue, the average spot price of Alaska North Slope crude was $65 in January, $54 in February and $33 in March. In January and February ANS crude tracked closely with Brent Crude, with WTI following a similar trajectory, but at a lower level. In March all three prices somewhat converged as global oil prices slumped. Then, starting in early April, Brent moved higher than the other two prices, while ANS tracked close to WTI. As of April 14, ANS West Coast was trading at $19, WTI at $20, and Brent at $29.
On April 7 the Department of Revenue reported a particularly low ANS crude price of $18 per barrel. However, the department later corrected this to $24 per barrel.
The West Coast market Most North Slope crude is delivered by tanker to refineries on the U.S. West Coast. And the West Coast oil market is disconnected, and hence distinct from, the oil market to the east of the Rocky Mountains where the WTI pricing prevails. In an interview with Juneau news outlet KTOO, Alaska Chief Economist Dan Stickel commented that ANS crude has similar qualities to Brent crude and is traded in a similar manner.
Economist Ed King told Petroleum News that he thinks the relative lowering of the ANS crude price may reflect a reduction of imported oil into the West Coast market, as refinery throughput drops. Rather than there being some link between WTI and ANS, it is likely that both are being impacted similarly by an oversupply of oil the ANS may return to the Brent level once California lifts its travel restrictions, King suggested.
Larry Persily, a former state and federal official who follows the Alaska oil and gas industry, also thinks that the current ANS pricing trend reflects a major drop in demand for refined oil products on the West Coast. A significant portion of the crude oil used on the West Coast is imported, rather than being shipped from Alaska the price of the Alaska oil, a minority feedstock, has been protected by oil imported at a higher price than that of oil in the WTI market. Now the Alaska oil has to compete on price with that imported oil at a time when the global oil price is dropping in response to a global fall in oil demand West Coast refineries have cut back on imports, but those imports have dropped in price, Persily said.
ALAN BAILEY
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