Bloomberg News

California Cuts Oil-by-Rail Shipments by 29% in Third Quarter

November 01, 2013

Oil delivered by rail to California, the world’s ninth-largest economy, tumbled 29 percent in the third quarter as shipments from Canada were halted and deliveries from states including North Dakota dropped.

The most populous U.S. state received 531,766 barrels of crude in rail-cars from July through September, down from 748,802 barrels in the prior three months, data posted on the state Energy Commission’s website show. Rail imports from Canada dropped to zero after totaling 76,648 barrels a quarter earlier. North Dakota, where fields in the Bakken formation are producing a record volume of crude, cut rail deliveries by 17 percent.

Third-quarter rail shipments were up 9.5 percent from a year ago as West Coast refiners, facing declining supplies from California and Alaska, build rail offloading terminals to reach a glut of oil being extracted from shale formations in the middle of the country. Alaska supplied 12 percent of California’s oil in 2012, down from 22 percent a decade ago, according to the state Energy Commission.

Oil-by-rail receipts to California from Colorado fell to 142,939 barrels in the third quarter, down from 225,201 in the three months ended June. North Dakota shipments totaled 263,072 barrels. New Mexico sent 108,999 barrels to state, slipping from 104,855 in the second quarter.

Oil produced in Alaska’s North Slope is set to become an “advantaged crude,” meaning it will sell at a discount to oils priced against North Sea Brent, as cheaper, domestic oil makes its way to the West, Phillips 66 (PSX:US) Chief Executive Officer Greg Garland said on a conference call Oct. 30 with analysts and investors.

Alaskan Decline

Alaskan oil output has declined every year since 2002 as the yield from existing wells shrinks. Alaska North Slope crude production averaged 534,306 barrels a day in October, down from 572,589 a year earlier, data posted on the Alaska Department of Revenue’s website today showed.

“The actions we’re taking, the actions others are taking, put pressure on some of these crudes,” Garland said on the call. “And so I think we do get 100 percent advantaged crude over the next couple of years.”

ANS stockpiles at the Valdez Marine Terminal, the delivery point of the Trans Alaskan Pipeline System, known as TAPS, rose 5.9 percent to 3.13 million barrels last month from the same period in 2012, the state website shows.

The premium for ANS versus the U.S. benchmark West Texas Intermediate crude shrank $1 to $7.75 a barrel at 4:16 p.m. New York time, data compiled by Bloomberg show. The spread has narrowed by more than half since the beginning of the year.

To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

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


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