Alaska oil falls from its highest price since 2008, trimming one windfall estimate

Alaska North Slope crude fell $8.63 a barrel over two trading days after hitting its highest price since July 2008, according to the state Department of Revenue.

The state's daily price table shows North Slope oil at $130.99 on Oct. 30, then $122.46 on Nov. 2 and $122.36 on Nov. 3, a drop of about 6.6%. The Oct. 30 price topped the $130.12 reached Oct. 23, when North Slope oil was nearing its highest price since 2008.

Even after the drop, oil is far above what the state planned for. The Revenue Department's spring forecast assumed $75 a barrel for the budget year that began July 1. At that price, it expected oil to bring in $1.88 billion of the $6.73 billion in unrestricted general fund revenue, the money the Legislature can spend as it chooses.

How big the windfall ends up depends on production and on where prices go over the next eight months, and prices kept falling after the last figure in the state's table. The December contract for West Texas Intermediate, the main U.S. oil benchmark, closed at $102.95 on Oct. 30, $96.76 on Nov. 3 and $88.04 on Nov. 4, then rose to $90.65 Thursday, according to market data from Massive. North Slope oil has been selling for about $26 a barrel more than West Texas Intermediate's daily spot price.

The drop came during talks over reopening the Strait of Hormuz, the narrow waterway that carries much of the Persian Gulf's oil. Nothing reviewed shows an agreement has been reached.

One estimate of the windfall

Alaskans for Sustainable Budgets, a group that tracks the state budget and posts as ak4sb on Bluesky, updated its projection Thursday. It put the average price for the budget year so far at $98 and projected $101 for the full year, down from $108 on Oct. 29.

In a side-by-side comparison, the group cut its projected gain over the spring forecast from $1.67 billion to $1.28 billion, a drop of about $400 million in a week.

The estimate is the group's, not the state's. It blends actual prices so far with what futures traders are paying for oil delivered later, so it moves whenever those prices do. The group describes itself as a nonpartisan project that helps develop and advocate for fiscal policies. On Nov. 4 it posted that Alaska families "deserve a big tax rebate."

The state's own math shows how much price swings matter. Its revenue sensitivity table says a $110 average falling to a $100 average takes about $530 million out of the year's unrestricted general fund revenue.

Production is behind

That table assumes the North Slope pumps as much oil as forecast. So far it has pumped less.

The spring forecast calls for an average of 518,500 barrels a day this budget year. The state's figures show about 453,600 barrels a day in July, 456,800 in August, 499,700 in September and 524,700 in October, for an average of about 485,500 since July 1.

Some of that is seasonal. Output usually bottoms out in summer, and last budget year July was the lowest month, at about 387,600 barrels a day. Comparing against last year's pattern, the budget group posted Thursday that production is running about 19,000 barrels a day, or 4%, behind forecast. To catch up, it said, the rest of the year would need to average about 542,000 barrels a day.

The capital trigger and ConocoPhillips

Prices so far are above one budget trigger. The Legislature made $26 million in capital projects contingent on North Slope oil averaging $80 from July through December. The 88 trading days through Nov. 3 averaged $98.69.

ConocoPhillips (COP), the North Slope's largest producer, has gained ground against oil prices over the past month. Its shares closed at 2.089 times the price of the United States Brent Oil Fund (BNO) on Oct. 6 and 2.166 times on Thursday, peaking at 2.267 on Nov. 4, according to Massive. That means the stock gained about 4% relative to oil over the month.