Ozark Pipeline Shutdown Will Limit Crude Capacity From Cushing

Enbridge Inc. (ENB)’s planned shutdown of the Ozark pipeline for 10 days starting June 10 will reduce capacity to move oil from Cushing, Oklahoma, the delivery point for futures on the New York Mercantile Exchange.

Enbridge will shut the line, which has the capacity to carry 215,000 barrels of crude a day to Wood River, Illinois, from Cushing, for planned maintenance, said Larry Springer, a Houston-based spokesman for the company. Monthly throughput will be reduced by 40 percent, he said.

The shutdown will cut takeaway capacity from Cushing by about 70,000 barrels a day for the month, said Andrew Lebow, senior vice president for Jefferies Bache LLC in New York.

“It will have a very modest impact, but it shouldn’t be a game-changer,” Lebow said. “Unless something goes wrong with the maintenance and the outage is longer, then it could become more significant.”

Crude supplies at Cushing fell 1.38 million barrels in the week ended April 26 to 49.8 million, according to Energy Department data. Inventories rose to a record 51.9 million barrels on Jan. 11.

Stockpiles have more than tripled since 2008 amid surging domestic production and lagging infrastructure. The glut in Cushing has caused West Texas Intermediate futures, which averaged a premium over European Brent futures before 2011, to drop to an average discount of $17.47 a barrel in 2012.

That discount has shrunk by more than half since Feb. 8, when it reached $23.44 in intraday trading, as Enterprise Products Partners LP (EPD) and Enbridge’s Seaway pipeline increased flows out of Cushing and other companies ramped up projects to move crude from West Texas to the Gulf Coast instead of Cushing. The discount grew 72 cents to $9.30 a barrel today.

“If this was a year ago, it would be a lot worse,” Lebow said of the Ozark shutdown. “Now that the infrastructure is being built, takeaway is much more efficient than it was a year ago.”

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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