Bloomberg News

WTI Midland Discount Plunges to Record on U.S. Gulf Output Surge

April 03, 2012

The price for West Texas Intermediate oil in Midland, Texas, plunged to a record discount versus the same grade in Cushing, Oklahoma, as regional production outpaced pipeline development.

Production in the U.S. Gulf Coast, or PADD 3, rose by 88,000 barrels a day to 3.5 million barrels in January, up from 3.41 million barrels a day in December, the Energy Department said yesterday.

“Midland is a bottleneck” because of increased oil production from the Permian Basin, Mike Mears, chief executive officer at Magellan Midstream Partners LP, said during an investor conference in New York. “You are starting to see a larger-than-historical differential between Cushing crude and Midland crude.”

The discount for WTI at Midland (USCSWTIM) versus the same grade at Cushing widened $1.05 to $8.30 a barrel at 11:08 a.m. New York time, the widest gap since at least 1991, according to data compiled by Bloomberg. The spread narrowed to $8.15 at 2:17 p.m.

Midland is about 483 miles (777 kilometers) by road from Cushing.

Light Louisiana Sweet’s (USCSLLSS) premium added 65 cents to $22.25 a barrel over the U.S. benchmark at 2:17 p.m. Heavy Louisiana Sweet (USCSHLSE)’s premium increased 40 cents to $23.50 a barrel.

Thunder Horse’s premium narrowed 25 cents to $17.75 a barrel over WTI, and Mars Blend (USCSMARS) increased 15 cents to a premium of $15.50. Poseidon’s premium was unchanged at $14.65, while Southern Green Canyon’s dropped 25 cents to $15.10.

West Texas Sour (USCSWTSM)’s discount widened $1 a barrel to $8.30 below WTI.

Western Canada Select (USCSWCAS)’s discount was unchanged at $24 a barrel, Bakken oil’s was steady at $11 and Syncrude’s discount was unchanged at $3.75.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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