From the Chicago Mercantile Exchange:
By The Schork Report - Thu 24 Jan 2013 10:59:37 CT
CME WTI plunged yesterday afternoon as news began to trickle into the market that Enbridge had slashed shipments on the Seaway pipeline. According to media reports, deliveries on Seaway were cut to 175 Mb/d because of “… unforeseen constraints in outbound takeaway”, i.e. the Jones Creek terminal complex (PADD 3 Freeport, TX) is stuffed to capacity.See also:
The Jones Creek terminal, located on the Gulf Coast, west of Houston, is the end of the road for barrels being shipped down from Cushing. The complex has capacity of 2.4 MMbs and is south of Phillips 66 Sweeny, TX refinery (250 Mb/d).
The Seaway line is a 50/50 joint venture between Enterprise Products Partners and Enbridge. The pipe runs 500 miles, from the NYMEX delivery complex in Cushing, OK to Freeport, TX and takeaway capacity serves the entire Greater Houston refinery epicenter.
According to a press release on Enbridge’s website, crude oil from Cushing began arriving at the Jones Creek terminal last June. “In reversed service the line has a capacity of 150 Mb/d. Following pump station additions and modifications, anticipated to be completed in January 2013, the capacity of the reversed Seaway Pipeline will increase to approximately 400,000 BPD of crude oil, assuming a mix of light and heavy grades”.
Two weeks ago (January 11th) Enbridge announced that upwards of 400 Mb/d of capacity along the line was indeed available to shippers.
This event spurred the sell-side of Wall Street to hop onto the bandwagon. For instance, in a letter to its Muppets:
Expansion of Seaway oil pipeline to boost WTI and narrow Brent-WTI price spread, Goldman Sachs said in a note yesterday. 14-Jan-13, Bloomberg
Moreover, Tuesday’s John Kerry moment by Nebraska’s governor, Dave Heineman (he was against Keystone XL, before he was for it) inspired Wall Street to pile on. In addition to the quote referenced on the first page, Morgan Stanley went on to say:
Brent’s premium to WTI will drop after the Keystone XL pipeline starts operating, bringing Canadian tar-sands crude to the U.S. Gulf Coast…
23-Jan-13, Bloomberg
Keep in mind, commission-takers on Wall Street are not saying anything controversial. As noted two weeks ago in The Schork Report, with the flow of midcontinent U.S. oil to the Gulf Coast set to rise, the Brent/WTI spread had contracted over the last two months from over $25/b to below $19/b. With the flow on Seaway purportedly ramping up to 400 Mb/d last week, the Brent/WTI spread was trading well below $16/b....MORE
May 2012
Counting the Barrels of Oil Leaving Cushing (EPD; ENB)
Jan 7, 2013
Brent-WTI Spread Narrows as Seaway Pipeline Readied to Move Oil From Cushing Bottleneck to Gulf Coast Refineries
Jan 11, 2013
Expanded Seaway pipeline start-up proceeds, crude flows--Next Steps: Double Capacity Again, Watch WTI-Brent Spread Shrink, Saudis Cry (ENB; EPD)
Jan. 18, 2013
An End to the Above-ground Oil Inventory Build
