NEW YORK--Oil futures strengthened Tuesday after a pipeline company said it would double the capacity of a pipeline connecting Oklahoma storage with Gulf Coast refineries sooner than previously expected.
Light, sweet crude for April delivery settled up $1.62, or 1.7%, at $99.70 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange rose 55 cents, or 0.5%, to $106.79 a barrel.
Enterprise Products Partners LP (EPD) said Tuesday the expanded Seaway pipeline will be in service by late May or early June, Bloomberg News reported. The company had previously said the expansion would be completed by the end of the second quarter.
The 500-mile, 30-inch diameter pipeline runs from storage hub Cushing, Okla., where the Nymex contract is priced, to the Gulf Coast. A new parallel pipeline is being built to expand Seaway's capacity from 400,000 barrels a day to 850,000 barrels a day.
A storage glut has built up in Cushing as U.S. oil production rapidly increased without sufficient transportation channels to connect the crude to existing refineries. The bottleneck kept U.S. prices below that of Brent crude oil, the international benchmark, in recent years.
The southern leg of TransCanada Corp.'s (TRP.T, TRP) Keystone XL pipeline started commercial service to transport crude oil from Cushing to the Gulf Coast on Jan. 22. The new pipeline leg is projected to transport 520,000 barrels a day on average this year.
Supplies at Cushing have fallen for six straight weeks and stand at their lowest level since February 2012, according to the U.S. Energy Information Administration.
Declining Cushing stockpiles sent benchmark U.S. oil prices, West Texas Intermediate, rallying above $100 a barrel last month.
A further loosening of the bottleneck in Cushing could bring WTI prices closer in line with Brent prices, said Stephen Schork, editor of The Schork Report.
"You would expect to see midcontinent crude-oil prices gravitate up towards...some of the competing intermediate sweet crudes," Mr. Schork said.
Despite shrinking Cushing supplies, analysts expect the EIA to report that overall domestic crude stocks rose last week, amid lower demand due to seasonal refinery maintenance.
The closely watched survey from the Energy Information Administration is due at 10:30 a.m. EDT Wednesday.
U.S. oil inventories are projected to have increased by 2.3 million barrels, on average, in the week ended March 14, according to a Wall Street Journal survey. Analysts also expect the agency to report that gasoline supplies fell by 900,000 barrels, while stocks of distillates, including heating oil and diesel fuel, declined by 600,000 barrels and refinery use fell by 0.2 percentage point to 85.8% of capacity.
The American Petroleum Institute, an industry group, said late Tuesday that its own data for last week showed crude stocks rose by 5.9 million barrels, according to industry sources. The API also said gasoline stocks fell by 1.4 million barrels, distillate inventories dropped by 674,000 barrels and refinery runs increased by 0.4% to 86.9% of capacity, the sources said.
Front-month April reformulated gasoline blendstock, or RBOB, settled up 2.17 cents, or 0.8%, at $2.9028 a gallon. April diesel settled up 2.47 cents, or 0.9%, at $2.9155 a gallon.