Arab Today, arab today oil pipeline reversal could narrow brent
Last Updated : GMT 04:58:02
Arab Today, arab today
Arab Today, arab today

Oil pipeline reversal could narrow Brent

Arab Today, arab today

Arab Today, arab today Oil pipeline reversal could narrow Brent

Abu Dhabi - Arabstoday

The Seaway pipeline, which was built in 1995 to transport crude from Freeport, Texas to Cushing, Oklahoma, is now reversed to transport the rising stocks in the latter to the main US refining centre on the Gulf Coast. The reversal may have an impact on crude oil pricing and the direction of international flows. Before that, let me say that for the evolution of crude oil prices, one has to look at benchmark crudes in the main trading centres. There are many benchmarks but the most famous are West Texas Intermediate (WTI), the famous marker of North America, and Brent, the famous North Sea blend, which has gradually become the international marker by the fact that almost two thirds of traded oils are priced relative to it. WTI and Brent qualities are close to each other and WTI is a bit lighter with less sulphur and location wise and is closer to the world’s biggest crude oil market. Therefore, historically the price differential between the two was generally around $1 (Dh3.67) to $2 a barrel in favour of WTI. However, sometime in 2007, the premium shifted gradually in favour of Brent over WTI and in early 2009, WTI traded at $10 a barrel discount to Brent and Saudi Arabia stopped using WTI in pricing its crude to the US. The broken relationship worsened and the differential between WTI and Brent reached almost $28 a barrel and WTI was described as a “broken benchmark” and “irrelevant”. The settling point for the WTI price is in Cushing, Oklahoma and the continued rise in stocks of crude to the level of over 46.8 million barrels recently have made the continuation of this situation possible. It is easy to collect crude in Cushing by a number of pipelines but the lack of sufficient transportation capacity out of Cushing to other refining centres or export has been very detrimental to the price of WTI, though welcomed by refiners in the Midwest and the West who reaped the benefit of cheaper crude.Pipeline capacity The Seaway pipeline is 30 inch in diameter and 1077 kilometres long and in reversed service, the line is operating with an initial capacity of 150 thousand barrels a day (kbd) since the last couple of weeks. Further additions of pumps and modifications are likely to step up the rate to 400 kbd by early 2013. Encouraged by commitments of users, the owners are going ahead with raising the capacity to 850 kbd by the middle of 2014 by laying a complete parallel line. Gulf Coast refiners will benefit from the cheaper WTI but the theory goes that as the stocks in Cushing are reduced substantially, WTI price will increase and its parity with Brent may even be restored. Analysts are divided over the impact of the reversal. Goldman Sachs believe that relieving stocks at Cushing should ease the pricing anomaly where inland US crude trades at an abnormally wide discount to seaborne Brent and that the WTI discount to Brent may narrow to $5 a barrel by the end of the year. But Barclays believe the reversal is almost irrelevant as the bottleneck will persist at Cushing for some more time to come as the rapid growth of oil production in the US and Canada outstrips pipeline, railway and barge projects to carry it south. Barclays recently raised their Brent price forecast and lowered WTI such that the average spread for 2012 would be $15 a barrel, $10 in 2013 and no return to parity until 2020. Knee-jerk reaction Even at the announcement that Seaway will be reversed, the market reacted by reducing the gap between the two crudes to $9.21 a barrel but this was thought to be a knee-jerk reaction and the differential widened again. The current differential is about $15 a barrel and is gradually reduced for future months. But let there be no doubt that completion and expansion of other pipelines and rail and barge transportation facilities from Cushing to the Gulf coast, which may eventually raise the flow to 1.5 million barrels a day, will indeed ameliorate the WTI-Brent spread and we are unlikely to see a $27 a barrel spread again. But rising Canadian heavy and US shale crude production in addition to the rising southbound transportation capacity to the Gulf coast will reduce the need for imported supplies and the talk about energy independence and reduced dependence on the Middle East is on again. The Nigerians are already worried about their exports to the US Gulf and are seeking buyers in Europe and Canada especially after the closure of some East coast refineries. Oil producers should be watchful for these changes as they are likely to affect the crude oil market worldwide and not just in the US.The writer is former head of the Energy Studies Department in Opec Secretariat in Vienna.from Gulf news.

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today oil pipeline reversal could narrow brent Arab Today, arab today oil pipeline reversal could narrow brent

 



Arab Today, arab today
Arab Today, arab today Nohan Seyam designs beautiful accessories

GMT 20:02 2017 Tuesday ,21 February

Nohan Seyam designs beautiful accessories
Arab Today, arab today Tourism shows signs of recovery

GMT 09:59 2017 Monday ,20 February

Tourism shows signs of recovery
Arab Today, arab today Sarah Belamesh designs antiques of "ceramic"

GMT 19:45 2017 Monday ,20 February

Sarah Belamesh designs antiques of "ceramic"
Arab Today, arab today 11 family members dead in rebel push

GMT 07:57 2017 Tuesday ,21 February

11 family members dead in rebel push
Arab Today, arab today To probe sexual harassment claims

GMT 10:08 2017 Tuesday ,21 February

To probe sexual harassment claims
View News in Arabic - Business: نفط وبتروكيماويات
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today 57 monkeys carrying 'invasive' genes

GMT 16:00 2017 Tuesday ,21 February

57 monkeys carrying 'invasive' genes
Arab Today, arab today 63-Year-Old Woman Delivers Baby

GMT 12:35 2017 Tuesday ,21 February

63-Year-Old Woman Delivers Baby
Arab Today, arab today Small ponds have outsized impact

GMT 15:53 2017 Tuesday ,21 February

Small ponds have outsized impact
Arab Today, arab today Pluto's unruly moons

GMT 06:31 2015 Thursday ,04 June

Pluto's unruly moons
Arab Today, arab today Nissan enhances sales in most markets

GMT 14:08 2017 Monday ,20 February

Nissan enhances sales in most markets
Arab Today, arab today Competes Sweden and Germans by S90

GMT 22:36 2017 Thursday ,16 February

Competes Sweden and Germans by S90
Arab Today, arab today Ahmed Fahmy stresses he did not ignore singing

GMT 06:34 2017 Sunday ,19 February

Ahmed Fahmy stresses he did not ignore singing
Arab Today, arab today London to tax old cars

GMT 14:06 2017 Friday ,17 February

London to tax old cars

GMT 21:11 2017 Saturday ,18 February

Egypt to hold first session of Arab film festival

GMT 06:50 2017 Wednesday ,15 February

Tragic fluctuations of Bakhtiari's life revealed

GMT 12:22 2017 Monday ,20 February

Kanye West puts hijab-wearing model

GMT 20:41 2017 Wednesday ,15 February

Teach monkeys to recognize themselves in mirror

GMT 23:29 2017 Thursday ,16 February

Home built on sand castles-style costs $8m

GMT 14:51 2017 Monday ,20 February

Ways to acquire presentation skills

GMT 19:16 2017 Friday ,17 February

Aziz House ready to host the tourists

GMT 13:12 2015 Saturday ,09 May

Sheikh Sultan opens Sharjah Centre

GMT 12:39 2017 Monday ,20 February

newest smartphone another winner for Huawei

GMT 16:08 2017 Wednesday ,15 February

Shawsh reveals her collection "Jewelry of dreams"
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday