Brent-WTI Crude Spread Widens After Exxon Shuts Pipe to Texas
West Texas Intermediate oil’s discount to London's Brent widened from the narrowest in almost nine months after Exxon Mobil Corp. (XOM) shut a pipeline carrying crude from Illinois to the U.S. Gulf Coast.
Exxon shut its 96,000 barrel-a-day Pegasus pipeline system on March 29 after a leak spilled heavy Canadian crude near the town of Mayflower, Arkansas. The company has collected about 12,000 barrels of oil and water, according to a statement yesterday from the Mayflower Incident Unified Command Joint Information Center. The city recommended the evacuation of 22 homes in the area.
The stoppage will mean less crude can be transported from the U.S. Midwest, potentially exacerbating a glut of oil coming from Canada to the Midwest and depressing U.S. prices relative to European contracts. U.S. stockpiles rose 0.9 percent in the week ended March 22 to the highest since June and stood 12 percent above the five-year average. Inventories at Cushing, Oklahoma, the delivery point for WTI futures, increased 0.9 percent and were 54 percent higher than the average.
“U.S. crude inventories are at a fairly high level right now and the Pegasus pipeline shutdown will further increase pressure,” Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai, said in a phone interview.
The spread increased as much as 23 cents to $13.02 a barrel today and was at $12.93 at 10:38 a.m. Singapore time. It closed at $12.79 on March 28, the least since July 4. Brent and WTI didn’t trade on March 29 because of the Good Friday holiday.
Pegasus is a 20-inch line that runs from Patoka, Illinois, to Nederland, Texas. The system was carrying Wabasca Heavy Crude from western Canada at the time of the incident, Kimberly Brasington, an Exxon spokeswoman, said yesterday.
The company will need to excavate the line to determine the cause of the breach, Brasington said yesterday.
Fifteen vacuum trucks and 33 storage tanks have been deployed to the site of the spill to aid clean up efforts, according to the Unified Command, which consists of Exxon, Mayflower and Faulkner County. The company has sent 120 workers in response.
The U.S. Environmental Protection Agency is categorizing the incident as a “major spill” as it is larger than 250 barrels. according to the Unified Command statement.
To contact the reporter on this story: Ann Koh in Singapore at firstname.lastname@example.org
To contact the editor responsible for this story: Alexander Kwiatkowski at email@example.com