Seaway, a 150,000 barrel per day line that was reversed earlier this year to ship crude 500 miles southward from Cushing, Oklahoma, to Houston, Texas, will be expanded to run 400,000 barrels per day as of next month, according to a recent filing by Enterprise to the U.S. Federal Energy Regulatory Commission. The plans detailed in the filing were confirmed by Enterprise spokesman Rick Rainey.
A further expansion to 850,000 barrels per day is scheduled to take place in the first quarter of 2014, after a new twin line with capacity of 450,000 bpd is built parallel to the existing Seaway line, Rainey said.
Enterprise has said its Seaway expansion would be complete in 2014, but the latest timeline suggests Seaway’s expansion is proceeding quickly and the line may soon ship much larger volumes from the land-locked Midcontinent to the Gulf Coast refining hub.
A glut of crude in Cushing – the delivery hub for U.S. crude futures held a near record 46.8 million barrels in the week to Dec. 7 – has contributed to the heavy discount of U.S. West Texas Intermediate crude futures to European benchmark Brent crude, which is shipped around the world.
Seaway will bring more crude to the U.S. Gulf Coast where it fetches prices closer to Brent, while potentially drawing down U.S. Midwest crude stocks.
The price spread between Brent and WTI futures narrowed on Monday to around $20 a barrel in favor of Brent, down from $22 a barrel last week CL-LCO1R.
“The Seaway expansion appears to be a factor in the spread today, which is coming in,” said analyst Addison Armstrong of Tradition Energy in Connecticut. “It means there will be more domestic crude shipped to Gulf Coast refiners and it begins to clear the crude glut that has developed in the Midcontinent.”
U.S. crude futures, which are delivered at Seaway’s starting point of Cushing, rose by 78 cents a barrel to $87.51 by 12:04 p.m. EST (1704 GMT).
© Thomson Reuters 2012