U.S. Gulf Crudes Slide on Speculation Seaway Issues Short-Lived

Spot crude in the U.S. Gulf Coast weakened after the differential between U.S. and European benchmarks narrowed on speculation a reduction in rates on a pipeline from the Midwest to the Gulf would be short-lived.

West Texas Intermediate’s discount to Brent narrowed by 24 cents to $17.33 a barrel, according to data compiled by Bloomberg. When Brent loses ground versus WTI, it typically weakens the value of U.S. grades that compete with foreign oils priced against the European benchmark. A return to higher rates would increase the amount of light oil in the Gulf Coast.

“The WTI-Brent spread widened a great deal yesterday because of the Seaway news, but is coming in today,” said Mike Wittner, head of oil-market research for the Americas at Societe Generale SA in New York. “There’s a feeling any issues will be temporary.”

Light Louisiana Sweet oil weakened $1.20 to $19 a barrel above WTI in Cushing at 2:03 p.m. in New York, according to data compiled by Bloomberg. Heavy Louisiana Sweet’s premium narrowed 20 cents to $19 a barrel.

The WTI-Brent spread widened $1.83 yesterday after Enterprise Product Partners LP (EPD) announced it had reduced the capacity on its Seaway pipeline that carries crude to Houston from Cushing, Oklahoma, the delivery point for WTI futures traded on the New York Mercantile Exchange.

Takeaway Constraints

The pipeline can only take 175,000 barrels a day at its Jones Creek terminal because of takeaway constraints at the location, said Rick Rainey, a Houston-based spokesman for the company. Enterprise on Jan. 11 said the pipeline had resumed service and was increasing toward an expanded capacity of 400,000 barrels a day.

Enterprise is waiting for third-party operators to “take care of any work or issues they may have” and has no estimate when Seaway flows will increase, Rainey said.

Mars Blend weakened 25 cents to a $13.75-a-barrel premium to the U.S. benchmark. Poseidon’s premium fell 25 cents to $13.60 a barrel. Thunder Horse weakened 25 cents to $15.75 over WTI.

Southern Green strengthened 25 cents to a $13.25-a-barrel premium.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

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

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