By October 13, 2016 0 Comments Read More →

Plains All American Basin pipeline outage hits crude price spread

Plains All American Basin pipeline

Plains All American Basin pipeline was set to restart on Thursday after a 10-day hydrotest.

Plains All American Basin pipeline shut due to pressure issue

NEW YORK, Oct 13 (Reuters) – Plains All American Basin pipeline will extend an outage due to a pressure issue, the firm told shippers on Thursday.

The pipeline is the largest outbound pipeline that is capable of delivering some 450,000 b/d of Permian crude to Cushing Oklahoma. News of the extended outage caused a narrowing in the spread between the front-month to second-month crude contracts, as traders anticipated a draw of nearly 2 million barrels a week from Cushing due to the outage.

On Thursday, Plains All American’s Basin pipeline sent a notice to customers, seen by Reuters, saying it had delayed a planned restart due to an unspecified “pressure deviation.” The pipeline was set to restart on Thursday after a 10-day hydrotest.

The discount for front-month U.S. crude futures to the second month tightened by nearly 10 cents after the news, trading to just 33 cents.

Local cash prices, known as West Texas Intermediate at Midland, Texas, plunged to trade at a $1.00 a barrel discount to U.S. crude futures from a 15-cent discount earlier in the day, dealers said.

If work on the pipeline is not completed by Oct. 20, storage on the pipeline, along with storage on the Plains systems and other third party pipelines west of Colorado City could become full, according to the notice. Traders added that full storage could lead to another price slump for cash prices.

Plains said that there would be no movement of crude oil from Colorado City, Texas, to the north of the Basin System, which connects into Cushing, Oklahoma. It added that deliveries to Cushing and connecting carriers at Wichita Falls, Texas, from the Wichita Falls station will be suspended on Friday.

A company spokesman could not immediately be reached for comment.

(Reporting by Catherine Ngai in New York and Liz Hampton in Houston; Editing by Chris Reese)

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