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06 07, 2012 by Reuters
The reversed Seaway oil pipeline delivered the first crude from the Cushing, Oklahoma, trading hub to the Gulf Coast o n W ednesday, a historic step aimed at easing the glut of crude in the U.S. Midwest, partners Enterprise Products and Enbridge Inc announced.
"The arrival marks the first southbound delivery of crude by pipeline from the oversupplied Cushing hub, and gives producers access to all of the major refiners in the Greater Houston area and Texas City," a news release said.
The glut at Cushing, Oklahoma, the delivery pint for the New York Mercantile Exchange futures contract, has depressed the price of U.S. oil relative to the Brent benchmark.
The crude reached the Jones Creek terminal near Freeport south of Houston, more than 500 miles south of Cushing, at 11 a.m. CDT ( 1600 GMT), and the pipeline had reached the planned initial rate of 150,000 barrels per day, the news release said. The oil started the journey at Cushing May 19.
Market reaction was the opposite of what was expected when reversal was announced last fall. The hope was to bring depressed U.S. and Canadian crudes more in line with the world market as Cushing emptied.
West Texas Intermediate crude rose for the day, but not as much as North Sea benchmark Brent, widening the spread to $15.62 in favor of Brent at settlement from $14.55 Tuesday.
Gulf Coast cash crudes actually strengthened against inland U.S. crudes, with Light Louisiana Sweet selling up 90 cents at $13.60 a barrel over WTI and Mars sour hitting $11.50, up 80 cents.
"It's going to take a while to draw Cushing down with inventories pushing 48 million barrels," a trader said.
The U.S. government on Wednesday reported a build in crude inventories at Cushing last week even though U.S. inventories fell.
Crudes in the U.S. Midwest and Canada have been selling at steep discounts to Gulf Coast grades due to a lack of pipelines from oversupplied Cushing to the major Texas-Louisiana U.S. refining complex.
Transatlantic spreads, which had blown out to as much as $28 in favor of Brent, narrowed sharply to less than $10 at announcement of the plan last fall but have widened back to $14 to $16 as markets digested the likely initial impact.
Traders have said more volume flowing south is required. Enterprise and Enbridge are already at work adding pumping capacity to boost the flow rate to 400,000 bpd by the first quarter of 2013, the news release said.
Enbridge and Enterprise last November announced plans to reverse the pipeline, which historically flowed from the terminal near Freeport to Cushing.
Midwest oil producers and Gulf Coast refiners had called for additional pipeline outlets from Cushing to the Gulf Coast, but not until Enbridge bought ConocoPhillips' 50 percent share of Seaway last fall was the way cleared for Seaway reversal.
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