(Corrects headline and paragraph 2 to say prices firmed to a seven-month low, not eight-month low)
Oct 19 (Reuters) - West Texas Intermediate at Midland's discount to U.S. crude futures narrowed to the lowest level since March this week and remained tight on Friday as pipeline operators nominated crude volumes to move out of the Permian Basin, traders said.
WTI Midland's WTC-WTM discount to U.S. crude touched a seven-month low of $2.50 per barrel on Thursday, strengthening as pipeline operators in the Permian Basin nominated volumes. Trading activity also focused on Plains All American Pipeline LP's coming expansion of its Sunrise pipeline, traders said.
The inland grade traded at $3 per barrel on Friday, but traders said the differential could soon widen by several dollars again as shippers scramble to find a way to ship barrels not ordered by pipeline operators.
"Once the barrels are allocated, people don't know what to do with the other barrels, so that will weigh on prices," one trader said.
For example, if a shipper planned on transporting 20,000 barrels but was awarded an allocation of 18,000 barrels on the pipeline, the shipper will have to find another way to move the other 2,000 barrels. "It affects all other prices. A small amount messes up the whole game," the trader said.
In late August, WTI Midland traded at a six-year low of an $18.25 per barrel discount to U.S. crude as an oil pipeline bottleneck weighed on prices.
Reporting by Collin Eaton; Editing by Richard Chang