West Texas oil fell the most in a week as maintenance at Phillips 66’s refinery in Borger, Texas, refinery lasted longer than expected, reducing demand for crude produced in the Permian Basin.
The Phillips 66 refinery took down production units for maintenance on Sept. 22 and was scheduled to restart them last week, a person familiar with the situation said. The company said in an e-mail yesterday that the 146,000-barrel-a-day refinery was still undergoing planned maintenance. A company spokesman didn’t immediately respond today to a request for an update on the plant’s status.
WTI delivered in Midland, Texas, declined $5 a barrel to a discount of $12 to the same grade of oil delivered in Cushing, Oklahoma, at 2:18 p.m. New York time, according to data compiled by Bloomberg. It was the biggest drop since Nov. 20, when the grade reached a record discount of $20 a barrel.
West Texas Sour, another crude grade produced in West Texas, also dropped $5 to a discount of $11.75 a barrel.
The Texas grades fell to a record low last week as the extended maintenance at Borger contributed to a growing glut of oil and limited pipeline capacity out of the region.
Texas oil production increased 35 percent to an average of 2 million barrels a day in August from a year earlier, Energy Department data show. New drilling techniques have unlocked oil in shale rock formations, boosting the state’s output to the highest level since 1988.
WTI oil delivered at Midland has historically traded less than $1 below the Cushing price, reflecting the transportation costs between the two delivery points. This year, the oil has traded at an average discount of $3.29.
Pipeline projects are under way to provide more capacity to the region, including Magellan Midstream Partners LP’s plan to reverse the flow of the Longhorn pipeline to take crude from West Texas to Houston, expected early next year.