Additional pipelines planned will help close price gap for Canadian oil producers

Analyst Commentary, Matthew Bovencamp: Enbridge Inc. and Enterprise Partners LP plan to add additional pipelines as well as increase capacity and reverse the flow to the existing Seaway pipeline to ease the over capacity of crude oil in Cushing Oklahoma. Crude sold at Cushing Oklahoma, the delivery point of WTI futures, has been trading significantly below the Brent crude benchmark for more than a year. The discount is hurting Canadian oil producers’ revenues with price differentials around $20 per barrel, as of March 2012. The proposed pipeline would more than double the capacity of the Seaway pipeline linking Cushing, Oklahoma to the refineries in the Gulf Coast. The pipeline is intended to reduce the spread between the WTI and Brent crude prices, allowing Canadian oil producers to realize a higher price for their oil. This is welcomed news for the Canadian oil producers, especially since there is uncertainty in the Keystone XL pipeline.

Source: Bloomberg (Mar 27)

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