LONDON/NEW YORK—Global commodities trader Trafigura has started shipments of Permian Basin crude to the Corpus Christi oil hub in Texas via the new 670,000-barrel-per-day (bbl/d) Cactus II pipeline system, the company said in a statement on Aug. 12.
Trafigura signed a long-term agreement with pipeline operator Plains All American Pipeline LP last year to transport a total of 300,000 bbl/d of crude and condensate on the pipeline.
Reuters reported in June that Trafigura would be shipping full contractual volumes once the line-fill process was complete.
The Cactus II line is likely to see flows of about 300,000 bbl/d in August, and is likely to be near capacity by September, market sources estimated.
Trafigura is one of the biggest exporters of U.S. crude, and routinely ships barrels overseas.
The Cactus II pipeline is the first of three large pipelines expected to start up this year from the Permian Basin, the biggest in the United States, and is expected to alleviate a bottleneck that had depressed regional prices for more than a year.
West Texas Intermediate (WTI) prices in Midland, Texas, have strengthened to a premium compared with U.S. crude futures ahead of the pipeline’s startup.
On Aug. 12, prices were seen at a premium of about 20 cents a barrel to futures, dealers said.
As Midland crude strengthens to a premium, traders also expect the arbitrage window to ship barrels to Cushing, Okla., the delivery point for U.S. crude futures, to eventually shut.
Prices in Cushing have rallied over the past two weeks, with U.S. crude futures’ discount to Brent trading at about $4 on Aug. 12, the smallest since March 2018.
Mexican President Andres Manuel Lopez Obrador reiterated on June 2 the need for oil independence as his government said it would tender six construction contracts in June for a planned oil refinery in the southern state of Tabasco.
Black Rhino's partner in building the 550 kilometer-long (340 mile-long) pipeline is MOGS Oil & Gas Services (BRM), a subsidiary of Royal Bafokeng Holdings, Reuters said.
Analysts warn that the combination of high oil costs and weakening currencies could cause a global economic slowdown.