Permian pipeline constraints likely to ease sooner than expected
A new reports says crude oil pipeline constraints in the booming Permian Basin may end sooner than expected and prices will be less affected than previously believed.This is good news for US production and for stabilizing prices in the wake of sanctions on Iran. The increased production will also make it harder for OPEC and Russia to engage in price maintenance operations by restricting their own production.
The report by analysts at Raymond James says the West Texas region should see pipeline constraints ease by the end of 2019 and that price differences between oil sold in Midland and the Gulf Coast won't be as severe as previously estimated.
The price differential through 2019 for Midland oil compared to Brent, the global benchmark, is estimated to be $15 a barrel for 2019, down from the firm's previous estimate of $25 a barrel.
Oil prices for companies pumping oil in the Permian and selling it in Midland who don't have pipeline space have plummeted as buyers still have to find some way to get the crude oil from West Texas to the Gulf Coast.
The report highlighted some potential bright spots in the pipeline space, focusing on the Sunrise and Cactus II pipelines being built by Houston's Plains All American. The report says both pipelines are being fast tracked.