Gulf Crudes Weaken as More Domestic Light, Sweet Heads to Coast

Gulf Coast crudes weakened on the spot market as increasing supplies of light, sweet domestic oils made their way to Texas refineries.

Magellan Midstream Partners LP (MMP)’s Longhorn pipeline began shipping as much as 75,000 barrels a day to Houston from West Texas in mid-April and expects to reach 225,000 in the third quarter. Sunoco Logistics Partners LP (SXL)’s Permian Express pipeline to the Gulf from West Texas is scheduled to start transporting 90,000 barrels a day next month.

Light Louisiana Sweet oil weakened by $1.05 to a $9.55 premium to West Texas Intermediate oil as of 2:09 p.m. New York time, according to data compiled by Bloomberg. Heavy Louisiana Sweet’s premium shrank by 90 cents to $8.80.

“The expectation that more light sweet is going to be moving to the Gulf Coast is becoming a reality, with Longhorn online and the Permian Express coming right behind it,” Andrew Lebow, a senior vice president at Jefferies Bache LLC, said in a phone interview from New York.

The new pipelines have been built to carry light oil from shale basins unlocked by horizontal fracturing drilling technology. Texas oil production increased 28 percent to 2.3 million barrels a day in the 12 months ended Feb. 28, according to the U.S. Energy Information Administration.

Other Gulf Coast oils also weakened. Southern Green Canyon lost 50 cents a barrel to a $1.50 premium over WTI. Poseidon’s premium fell $1.60 to $3.25. Mars Blend fell $1.10 to a premium of $3.50. Thunder Horse slipped 75 cents to a premium of $6.25.

In Canada, grades were unchanged with no trades outside of the index period, according to Calgary oil broker Net Energy Inc. Western Canada Select last traded May 17 at a $21 discount to WTI, while Syncrude was unchanged at a 25-cent discount. The majority of the trading volume for June Canadian crude shipments occurred from May 1 to May 16, when the average price for next month’s delivery was set.

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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