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Gulf Oils Strengthen for Fourth Day as WTI Weakens Against Brent

Oils produced in the Gulf of Mexico strengthened for the fourth day, as news that Seaway pipeline deliveries at a key terminal would be constrained for months caused U.S. benchmark oil to weaken against overseas imports.

West Texas Intermediate oil lost as much as $1.54 a barrel to trade at a $19.60 below international Brent crude, its steepest discount since Dec. 28. The spread between the two benchmarks also widened sharply yesterday, after Enterprise Product Partners LP (EPD) said flows on Seaway through Jones Creek, Texas, would be limited until late in the third quarter.

Light Louisiana Sweet oil gained 95 cents to $19.30 a barrel above WTI, while Heavy Louisiana Sweet strengthened 85 cents to a $19.20 premium. Mars Blend, a sour offshore grade, added 85 cents to $14.35 over WTI.

Limits on the 400,000-barrel-a-day Seaway pipeline strengthen the price of offshore oils and international imports relative to WTI, since it brings competing oils from the U.S. midwest to the coast. Capacity at the Jones Creek terminal has been cut to 175,000 barrels a day. The bottleneck won’t be fixed until a lateral pipeline is finished late in the third quarter, the company said on a conference call yesterday.

In Canada, the price of heavy Western Canada Select for March delivery gained strength as Exxon Mobil Corp. (XOM) said today it expects to begin production at the Kearl oil sands plant in Alberta by the end of March with initial production of 37,000 barrels a day, ramping up to 110,000 by the end of 2013.

The delay in Kearl production means less Canadian heavy oil supply in the spot market. Western Canada Select gained 75 cents to a $30.50 discount to WTI, according to Calgary oil broker Net Energy Inc. The Kearl project had been expected to start production in January, but was delayed because of cold weather, a spokesman for Imperial Oil Ltd. (IMO), Exxon’s Canadian subsidiary, said last month.

The price of Syncrude, a synthetic light oil produced from oil-sands bitumen, lost 60 cents to trade at a 25-cent premium to WTI, as a refinery that takes the grade shut some operations.

PBF Energy Inc. shut a 75,000-barrel-a-day fluid catalytic cracker at its Toledo, Ohio, refinery yesterday to assess damage from a fire, a person familiar with the matter said.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

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

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