May 3, 2018 / 10:04 PM / 20 days ago

Crude volumes on Magellan's BridgeTex pipeline jump 50 pct in Q1

NEW YORK, May 3 (Reuters) - Magellan Midstream Partners LP said on Thursday volumes on its BridgeTex pipeline from Midland and Colorado City, Texas, to East Houston, Texas, surged 50 percent in the first quarter as demand rose.

Volumes on BridgeTex averaged about 315,000 barrels per day (bpd) during the first quarter compared with about 210,000 bpd a year earlier, company executives said during an earnings call.

Midland crude differentials have crashed to the biggest discounts versus benchmark futures in more than three-and-a-half years as production has outpaced pipeline takeaway capacity.

As differentials between crude grades in the Permian basin and Houston have widened, the company expects interest in spot shipments growing “at least for the next few months.”

On Thursday, West Texas Intermediate at Midland traded as much as $14 per barrel below U.S. crude futures WTC-WTM.

“The current tariff for spot shipment from both the Longhorn and BridgeTex pipelines is close to $4 per barrel, so shippers can easily justify moving spot barrels in this pricing environment,” Michael Mears, chief executive of Magellan said during the call.

BridgeTex was recently expanded from 300,000 bpd to a capacity of 400,000 bpd and is expanding again to about 440,000 bpd, to be operational in early 2019.

It also canceled one of its uncommitted rates to ship crude from Colorado City, Texas to the Houston area in April as demand from spot shippers increased.

Separately, almost all existing customers on its 275,000 bpd Longhorn Pipeline, which transports crude oil from Crane, Texas to Houston have extended contracts under current terms for an additional 2 years.

“We continue to assume ... that average tariff rates on Longhorn will likely be lower beginning in the fourth quarter of 2018, as we still prefer additional length to those commitments, even if that means a rate reduction for that longer-term surety,” Mears said.

Pricing for long-term commitments on crude oil pipelines originating from the Permian still remains quite competitive, with new capacity expected to come online over the next few years at lower rates, the company said. (Reporting by Devika Krishna Kumar in New York Editing by Chris Reese)

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