U.S. East Coast refiners are shipping more shale oil from the Gulf Coast thanks to discounts for West Texas crude. These refiners are also looking to bring in more shale oil more via rail, however, supply bottlenecks are making it difficult to secure more barrels. Producers are pumping record volumes of oil from the Permian basin, the biggest oilfield in the United States and the source of most of the country’s shale oil.
Pipelines from west Texas to the Gulf Coast are full, and developers will not finish new lines until next year. Rail terminals are nearly all dedicated to bringing supplies to shale producers such as the huge volume of sand used to extract oil from the ground. In the last seven years, crude has gone to the East Coast by rail in just one month – June of last year.
The transport bottlenecks could limit the pace of growth of shale production, and as pipelines fill, the price of oil in the region has fallen.
That has caused East Coast buyers to jump on the chance to purchase cheaper U.S. crude, boosting flows from the Gulf Coast to the East Coast to three-year highs. In the December-to-February period, an average of 2.8 million barrels went from the Gulf to the East Coast per month, according to figures from the U.S. Energy Information Administration, the highest three-month average since the same period in 2015.
Refiners such as Monroe Energy and Phillips 66 have been bringing barrels by sea to their facilities in the Philadelphia region. In addition, both companies are exploring how to bring crude by train as pipeline bottlenecks are making it difficult to increase volume by sea.
Just 46,000 barrels of crude have been railed to the East Coast from the Gulf region in the last seven years, according to EIA data, all in June 2017.
Image Caption: An oil pump is seen operating in the Permian Basin near Midland, Texas, US on May 3, 2017.
Image courtesy of REUTERS/Ernest Scheyder/File Photo