Oil Production In Permian Causes Pipeline Bottleneck In Texas

Reuters

NEW YORK, Aug 12 (Reuters) - Oil production from the burgeoning Permian Basin of West Texas is outpacing pipelines' ability to transport oil to the Gulf Coast, causing coastal refiners to pay an additional premium to acquire oil.

On Monday, that bottleneck caused oil for delivery at Midland, Texas <WTC-WTM> to trade at nearly $20 a barrel less than Gulf Coast benchmark Light Louisiana Sweet <WTC-LLS>, the deepest discount in 17 months. It was little changed on Tuesday.

The deep discount is a consequence of the U.S. shale revolution, which has unleashed a revival in U.S. production, unlocking billions of barrels of reserves of crude oil, boosting the economy and potentially outstripping domestic demand.

In shale formations in the Permian Basin of Texas and New Mexico, the rate of growth for oil production is set to increase for the sixth consecutive month in September, according to data from the EIA's drilling productivity report. The formation's growth rate is outpacing Texas' Eagle Ford, where growth slowed between February and August, and North Dakota's Bakken fields, where growth has been relatively stable in recent months.

As Permian production has taken off, infrastructure to move the crude has lagged.

With rising production, widening differentials may mean shippers need to be more creative to get oil to the coast, says Amrita Sen, chief oil analyst at Energy Aspects.

"On the whole, there's not enough takeaway capacity. What we will see is the differentials widening out as other forms of transportation like rail and trucking will become more economical," she said. "But we expect Gulf Coast grades to ease in the fourth quarter because of maintenance season. All that should ease some of the pressure."


12

View Full Article

Copyright 2017 Thomson Reuters. Click for Restrictions.

WHAT DO YOU THINK?

Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

Events  SUBSCRIBE TO OUR NEWSLETTER

Our Privacy Pledge
SUBSCRIBE



Most Popular Articles

From the Career Center
Jobs that may interest you
Solids Control Technicians - Bakken Region
Expertise: Electrical Technician|Mechanical Technician
Location: Williston, ND
 
Truck Driver (Sand)
Expertise: Driller|Oil Terminal / Storage Management|Well Servicing & Testing
Location: Midland, TX
 
Chief Engineer
Expertise: Ships Engineer
Location: San Diego
 
search for more jobs

Brent Crude Oil : $50.56/BBL 0.15%
Light Crude Oil : $47.7/BBL 0.70%
Natural Gas : $3.05/MMBtu 1.32%
Updated in last 24 hours