Seaway Pipeline Upgrade Signals New Era for U.S. Oil

  • 16 Jan 2013
  • By Platts
  • Topics: Energy

As Supply Glut Eases, Gulf Refiners Likely to Benefit

The expanded Seaway Pipeline, along with other new crude shipping capacity, marks a new era for the U.S. oil industry, soon flooding the Gulf Coast with light, sweet grades and signaling the region's impending disconnect from the North Sea benchmark Brent, according to Platts Oilgram News.

Earlier this month, the Seaway Crude Oil Pipeline Co. completed an expansion that boosted crude capacity to 400,000 barrels a day, nearly triple previous levels, between the Cushing, Okla., storage hub and the Texas Gulf Coast. Last May, the pipeline's inland flow was reversed amid efforts to address a glut in the central U.S.

The Seaway Pipeline expansion "allows Gulf Coast refiners to participate in the raw material advantage that we’ve seen in the Midwest," industry consultant Andy Lipow told Platts Oilgram News. "I anticipate seeing Gulf Coast refiners running high operating rates, [which will] translate the crude oil surplus into a petroleum products surplus, given the stagnant demand for refined products in the U.S.," he added.

Refining margins along the Gulf are expected to improve with the influx of "advantaged" crudes, but eventually regional crude prices will come under pressure from the new supply, analysts said. The WTI-Brent spread narrowed sharply earlier this month, as the Seaway expansion renewed market optimism that additional export capacity will help cut heavy stockpiles at Cushing.

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