HOUSTON, July 18 (Reuters) - West Texas Intermediate crude at Magellan East Houston this week traded at the weakest level in almost a year as new pipelines from the Permian Basin to the U.S. Gulf Coast hub have begun operations, traders said.
Line filling of pipelines owned by EPIC Crude Pipeline LLC and Plains All American Partners LP has eased an inland crude oil bottleneck, pushing Houston prices lower and prompting pipelines to cut transportation rates, traders and analysts said.
"Houston prices should weaken with more supply and limited new storage at refineries," a trader said.
WTI at Magellan East Houston WTC-MEH, also called MEH, on Tuesday sank to a $4 per barrel premium to U.S. crude futures , the weakest since last August, trade sources said. It peaked at $11.25 per barrel in February.
Earlier this month, Enterprise Products Partners LP and Enbridge Inc's Seaway pipeline lowered tariffs for light crude shipments from the main U.S. storage hub in Cushing, Oklahoma to the U.S. Gulf Coast, according to regulatory filings.
Seaway's lower rates encourage more flows to the coast, narrowing differentials between the two.
The MarketLink pipeline owned by TC Energy Corp, formerly known as TransCanada, also lowered rates for volumes from Cushing to Houston and Port Arthur, Texas.
More Permian crude could being arriving in Houston by year-end. Pipeline operator Kinder Morgan Inc on Wednesday said it will go ahead with a South Texas pipeline connection that would transport 100,000 barrels per day of crude from Phillips 66's Gray Oak pipeline to delivery points at the Houston Ship Channel, by end-2019.
Kinder Morgan and Phillips 66 began soliciting shipper commitments for the connection last February. The 900,000 bpd Gray Oak is expected to begin initial service in the fourth quarter.
"As EPIC and (Plains All American's) Cactus II enter full in-service and the market gears up for Gray Oak's entry to the ring later this year, East Daley continues to forecast further tightening for the spread between WTI and Houston," analysts at East Daley Capital wrote in a recent note to clients. (Reporting by Collin Eaton in Houston Editing by Matthew Lewis)