ConocoPhillips isn’t interested in reversing the Seaway pipeline that brings crude from the U.S. Gulf Coast to the fuel hub in Cushing, Oklahoma, where inventories of crude oil reached a record high last month.
“We don’t really think that’s in our interest because we need more crude in the area” to supply the company’s refineries in the Midcontinent, Jim Mulva, ConocoPhillips’s chief executive officer, said during a conference call hosted by ISI Group today.
Stockpiles at Cushing, the delivery point for futures traded on the New York Mercantile Exchange, rose in the week ended Jan. 28 to 38.3 million barrels, according to the Energy Department. That was the highest level in records begun in 2004. Last week TransCanada Corp. started deliveries to the hub from its Keystone pipeline, which connects Alberta and Cushing.
“A reversal would send up to 350,000 barrels a day of crude from Cushing directly to Houston, significantly releasing pressure on the Cushing complex,” said JBC Energy GmbH, a Vienna-based researcher.
The 530-mile (853-kilometer) Seaway pipeline, operated by Enterprise Products Partners LP, carries crude northbound from Freeport, Texas, to Cushing. It also supplies refineries in the Houston area and has a usable storage capacity of 3.4 million barrels, according to the company’s website.
Barclays Capital analysts said last week that the high inventories at Cushing and the new Keystone deliveries have combined to separate WTI, the U.S. benchmark, from Brent crude oil traded in London. Brent’s premium to WTI, which averaged 63 cents in 2010, surged to $15.85 Feb. 11.
Rick Rainey, a spokesman for Enterprise, said in an e-mail that ConocoPhillips and Enterprise would have to agree to reverse the pipeline. Seaway’s former operator, Teppco Partners LP, said in 2007 it would consider a reversal.