West Texas Intermediate crude in Midland, Texas, fell to the lowest level relative to the U.S. benchmark in more than a year as refineries reduce oil consumption during maintenance.
WTI in Midland weakened by $2.75 a barrel to a discount of $8.50 relative to WTI in Cushing, Oklahoma, at 1:55 p.m., according to data compiled by Bloomberg. It’s the largest discount since Jan. 16, 2013.
Western Refining Inc. was scheduled to shut the south side of its 128,000-barrel-a-day refinery in El Paso, Texas, in late January for planned maintenance, Gary Dalke, the company’s chief financial officer, said in an Oct. 31 conference call.
HollyFrontier Corp.’s 115,000-barrel-a-day refinery in Artesia, New Mexico, planned to shut a crude unit for maintenance at the end of January, a person familiar with work at the refinery said Aug. 22.
Magellan Midstream Partners LP’s Longhorn pipeline, which carries crude to Houston from the Permian Basin, will average 200,000 barrels a day of throughput in the first quarter, below the nameplate capacity of 225,000, the company said in a Feb. 5 statement.
Midland, 300 miles west of Dallas, is a pricing hub for the Permian Basin, the largest onshore U.S. oilfield. The basin is expected to produce 1.4 million barrels a day in February, according to Energy Information Administration forecasts.
That would be an increase of about 110,000 barrels a day from February 2013 and 500,000 barrels a day from February 2010. Producers driven by higher crude prices are using improved technology to recover more oil from old wells and find crude in previously untappable rock.
Booming production has tightened takeaway capacity in the region. Prior to 2012, prices in Midland rarely strayed more than $1 a barrel from Cushing, where pipelines deliver Permian crude.
Since the start of 2012, there have been two stretches where the discount stayed larger than $2 for more than 100 days, as pipeline slow downs and refinery maintenance cause supplies to build.