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Lack of Pipelines Continue to Push Down Bakken Prices
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- Created on Wednesday, 23 May 2012 09:06
Bakken crude oil continues to sell for less than oil from other areas because of transportation issues.
Inadequate pipeline to get the oil to refineries increases the cost of moving it, which impacts the price that buyers are willing to pay for it. That differential averaged $17.14 per barrel for the first three months of 2012, according to one report. Others have reported that it has been as high as 25 percent or $25 a barrel.
Some oil producers say they expect to see the differential shrink during the second quarter to about $12.50 to $13.50 per barrel.
The price gap between Bakken oil and the that posted at New York Mercantile Exchange (NYME) is forcing increasing amounts of oil to be shipped by rail.
Uncertainty over the future of the Keystone Pipeline XL – the most efficient means of transporting oil – is also contributing to the price gap.
The situation is, however, spurring more pipeline development by other companies. For example, ONEOK Partners and Enbridge Pipelines are both proposing lines which would deliver Bakken Crude to Oklahoma and Texas.
Companies are also building more rail facilities at an unprecedented pace to meet the demand.
Hess Corporation has a new terminal at Tioga, ND, and other companies, such as US Development Group, are expanding loading facilities.
