U.S. Natural Gas Futures Drop Below $3 for First Time Since 2012

Texas Oils Rise on Speculation Borger Refinery Resumed Output

Texas oils rose as Phillips 66 (PSX)’s refinery in Borger, Texas, began processing crude in units that were shut down in September for maintenance.

The 146,000-barrel-a-day refinery is operating one of three crude units and a fluid catalytic cracker, a person familiar with the operations said.

West Texas Intermediate crude delivered in Midland, Texas, rose $3.50 to an $11.50-a-barrel discount to the same grade delivered in Cushing, Oklahoma, as of 2:09 p.m. New York time, according to data compiled by Bloomberg. West Texas Sour, another crude grade produced in West Texas, rose $4.25 to a discount of $13.25 a barrel.

The Borger refinery processes mostly medium-sour crude from West Texas, the Texas Panhandle, Wyoming and Canada. Borger has been down for maintenance since Sept. 22, and the company said on Nov. 20 that the outage would be extended due to difficulty making repairs. The news drove the Texas oil grades down to a record $20 discount that day.

The Borger outage has contributed to a growing glut of supply in West Texas. Pipelines taking oil out of the region are running at capacity.

Texas oil production increased 33 percent to an average of 2.1 million barrels a day in September from a year earlier, Energy Department data show. New drilling techniques have unlocked oil in shale rock formations, boosting the state’s output to the highest level since 1988.

Volatile Trading

Trading in the Texas spot crude market has been the most volatile in more than three years. The 60-day historical volatility in Midland crude has more than doubled from its average level in October, reaching 58 percent today, according to data compiled by Bloomberg.

WTI crude delivered at Midland has historically traded less than $1 below the Cushing price, reflecting the transportation cost between the two delivery points. This year, the oil has traded at an average discount of $3.27 because of pipeline constraints.

Several projects are under way to relieve the bottleneck. Magellan Midstream Partners LP (MMP) plans to reverse the flow of the Longhorn pipeline to move crude from western Texas to Houston early next year. Sunoco Logistics Partners LP (SXL) plans to complete expansions in the Permian totaling 110,000 barrels a day in the first quarter, Chief Executive Michael Hennigan said during the company’s earnings call Nov. 8.

To contact the reporter on this story: Edward Welsch in Calgary at

To contact the editor responsible for this story: Dan Stets at

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