Exxon Mobil Corporation (XOM), Devon Energy Corp (DVN), ConocoPhillips (COP): Oil Price Spreads Affect Your Investments — Here’s How

The oil price between the two benchmarks is getting so narrow that refiners with easy access to ports are switching back to foreign crudes. Phillips 66 has reduced its shipments from the North Dakota region because the cost of the oil, plus shipment, is now greater than what the company can pay for foreign crudes from Nigeria. These small changes can mean a lot for Phillips 66. For every dollar change in the companies’ refining margin, the company stands to gain or lose $440 million in net income.

Those deliveries that were intended for Phillips 66’s refineries were slated to happen via rail, which is yet another sector that has been negatively affected by the narrowing of the WTI-Brent spread. The reason rail had emerged in the U.S. was because the lack of pipeline, and the large spread between domestic and foreign oil prices, combined to make oil via rail viable, even though it’s more expensive than moving via pipe. Now that the spread has narrowed, oil via rail shipments are dropping. Both Canadian Pacific and Union Pacific have recently stated that certain segments of the oil-via-rail business is falling away, like intrastate Texas, the oil prices are not there to support the premium to move via rail.

The article Oil Price Spreads Affect Your Investments — Here’s How originally appeared on Fool.com and is written by Tyler Crowe.

Fool contributor Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com under the handle TMFDirtyBird, on Google +, or on Twitter: @TylerCroweFool.The Motley Fool owns shares of Devon Energy.

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