West Texas Sour Strengthens Amid Permian Pipeline Expansions

West Texas Sour on the spot market strengthened the most in almost a month as Sunoco Logistics Partners LP (SXL) and Magellan Midstream Partners LP (MMP) prepared to expand pipeline capacity from the Permian Basin to Houston.

Sunoco is moving 40,000 barrels of crude a day from West Texas to Houston, with 70,000 barrels a day of capacity set to open to Longview, Texas, and Nederland, Texas, before the end of the first quarter, Joe McGinn, a spokesman for the Philadelphia- based company, said in a phone interview today.

Magellan’s Longhorn pipeline reversal expects to begin moving 75,000 barrels of crude a day late in the first quarter or early in the second quarter, increasing to 225,000 by mid 2013, Bruce Heine, a Tulsa, Oklahoma-based spokesman for the company, said in an e-mailed statement.

Production in the Permian basin, the largest U.S. oil field, grew to 1.29 million barrels a day in December from an average of 880,000 in 2009, according to a U.S. Energy Department analysis of well data. The increase outpaced growth in pipeline capacity out of the region, leading to a glut of oil in Midland, Texas, the delivery point for West Texas Sour.

WTS strengthened $3.85 to a discount of $14.15 a barrel at 3:48 p.m. New York time, narrowing the most since Dec. 21, according to data compiled by Bloomberg.

The discount of West Texas Sour to West Texas Intermediate, the U.S. benchmark crude, averaged $9.36 in the fourth quarter of 2012, the weakest quarterly average since Bloomberg began recording prices in 1991.

West Texas

WTI in Midland strengthened $2 to a discount of $10.50 a barrel to WTI in Cushing, the narrowest the discount has been since Jan. 3.

In Canada, Western Canada Select, an oil-sands bitumen blend, strengthened by $2.25 to a $36.75 discount to WTI, according to Net Energy Inc., a Calgary oil broker.

Phillips 66 (PSX) returned a crude unit at its 356,000 barrel-a- day refinery in Wood River, Illinois, to service after shutting it down for repairs over the weekend, a spokesman said in an e- mail.

Syncrude, a synthetic light crude produced from bitumen, rose 60 cents to a $1.20 premium to WTI. A Suncor spokeswoman said yesterday the company is planning a maintenance turnaround at its 350,000 barrel-a-day upgrader in Alberta sometime during April and May.

To contact the reporters on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net; Edward Welsch in Calgary at ewelsch1@bloomberg.net

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