West Texas Sour on the spot market strengthened the most in almost a month as Sunoco Logistics Partners LP and Magellan Midstream Partners LP prepared to expand pipeline capacity from the Permian Basin to Houston.
Sunoco is moving 40,000 barrels of crude a day from West Texas to Houston, with 70,000 barrels a day of capacity set to open to Longview, Texas, and Nederland, Texas, before the end of the first quarter, Joe McGinn, a spokesman for the Philadelphia-based company, said in a phone interview today.
Magellan’s Longhorn pipeline reversal expects to begin moving 75,000 barrels of crude a day late in the first quarter or early in the second quarter, increasing to 225,000 by mid 2013, Bruce Heine, a Tulsa, Oklahoma-based spokesman for the company, said in an e-mailed statement.
Production in the Permian basin, the largest U.S. oil field, grew to 1.29 million barrels a day in December from an average of 880,000 in 2009, according to a U.S. Energy Department analysis of well data. The increase outpaced growth in pipeline capacity out of the region, leading to a glut of oil in Midland, Texas, the delivery point for West Texas Sour.
WTS strengthened $3.85 to a discount of $14.15 a barrel at 3:48 p.m. New York time, narrowing the most since Dec. 21, according to data compiled by Bloomberg.
The discount of West Texas Sour to West Texas Intermediate, the U.S. benchmark crude, averaged $9.36 in the fourth quarter of 2012, the weakest quarterly average since Bloomberg began recording prices in 1991.
WTI in Midland strengthened $2 to a discount of $10.50 a barrel to WTI in Cushing, the narrowest the discount has been since Jan. 3.
In Canada, Western Canada Select, an oil-sands bitumen blend, strengthened by $2.25 to a $36.75 discount to WTI, according to Net Energy Inc., a Calgary oil broker.
Phillips 66 returned a crude unit at its 356,000 barrel-a-day refinery in Wood River, Illinois, to service after shutting it down for repairs over the weekend, a spokesman said in an e-mail.
Syncrude, a synthetic light crude produced from bitumen, rose 60 cents to a $1.20 premium to WTI. A Suncor spokeswoman said yesterday the company is planning a maintenance turnaround at its 350,000 barrel-a-day upgrader in Alberta sometime during April and May.