Offshore Gulf Oils Gain as Seaway Sees Long-Lasting Capacity Cut

Offshore crudes produced in the Gulf of Mexico strengthened against U.S. benchmark West Texas Intermediate after the Seaway pipeline’s operator said the line will operate below capacity “in the foreseeable future.”

The Seaway line carried 180,000 barrels a day after an expansion in January that was supposed to boost the flow from storage in Cushing, Oklahoma, to refineries on the Texas coast to 400,000 barrels a day, according to Feb. 15 testimony from Enterprise Products Partners LP to the Federal Energy Regulatory Commission.

Southern Green Canyon, an offshore grade delivered to Nederland, Texas, gained 60 cents to trade at a $15 premium to WTI as of 2:22 p.m. New York time, according to data compiled by Bloomberg. Bonito Sour and Eugene Island grades, delivered to ports in Louisiana, gained $1.25 and $1, respectively, to trade at premiums of $19 and $19.25 to WTI.

A diminished flow rate on Seaway strengthens the price of offshore oils relative to WTI, since the pipeline moves competing mid-continent oils to coastal refiners.

Flows at Seaway’s final terminal at Jones Creek, Texas, were cut to 175,000 barrels a day shortly after the expansion was opened in January because of capacity constraints there.

Other offshore Gulf grades also strengthened against WTI. Light Louisiana Sweet rose 35 cents to a $21.80 premium. Heavy Louisiana Sweet gained 15 cents to a premium of $21.70.

Thunder Horse, a medium sweet crude delivered to Louisiana, weakened by $1 a barrel to a $19.25 premium to WTI.

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