A pipeline that is a central artery of petroleum markets was shut down after a leak, helping push US benchmark oil prices below $50 a barrel.
A portion of the 850,000 barrel-per-day Seaway pipeline system released oil late Sunday night, its operator said. The line that spilled was closed, while a parallel line was expected to reopen Monday after a precautionary halt.
Seaway, a joint venture of pipeline companies Enterprise Products Partners and Enbridge, did not disclose how much crude leaked but said “substantially all” of it was contained in a retention pond at Enbridge’s facility at Cushing, Oklahoma, a tank complex known as the “pipeline crossroads of the world”.
Activity at Cushing is closely watched by oil traders because it is the delivery point for West Texas Intermediate crude oil futures. Since Seaway reversed flow in 2012, the pipeline system runs from Cushing southwards to the Gulf of Mexico coast.
Reversing Seaway helped reconnect US oil markets with prices in the rest of the world. The price discount for WTI crude against Brent, its international counterpart, has narrowed to about $1 a barrel from as much as $28 before the Seaway reversal and adjacent pipeline additions.
“This thing is the key connection between the WTI benchmark, the Gulf coast and the Brent benchmark,” said Jan Stuart, oil analyst at Credit Suisse, said of Seaway.
On Monday, oil markets fell more than 2 per cent. Nymex December WTI fell $1.05 to $49.80 a barrel, while ICE December Brent lost $1.07 to $51.12 a barrel. The price of December WTI lost more than contracts for later delivery, suggesting some oil will be temporarily trapped at Cushing.
Despite the falls, the US market has ample pipeline capacity and plentiful supplies of crude.
US pipelines built to handle booming shale oil supplies have been running less than full. Last week the Seaway system’s average flow was about 716,000 b/d, according to Genscape, a market intelligence group — well below its capacity.
A parallel line from Cushing to the Gulf, TransCanada’s 700,000 b/d MarketLink pipeline, was carrying only about 357,000 b/d last week, Genscape said.
One industry executive said that while the Seaway outages meant about 2m-3m barrels could be stuck at Cushing, traders were turning to supplies from the Permian basin of west Texas to meet any shortfall.
Meantime, stocks of crude oil on the US Gulf coast stand at about 240m barrels, down from recent record highs but still far above average.
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