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Enterprise's Seaway Crude Pipeline System Shut Following Oklahoma Spill

Reuters, October 24, 2016
Reuters

A leak prompted the Seaway Crude Pipeline Company LLC to shut one of the largest pipeline systems feeding crude from the U.S. oil storage hub in Cushing, Oklahoma to Gulf coast refineries on Monday, its operator Enterprise Products Partners LP said. Enterprise did not provide an estimate of the volume spilled, but said much of it was contained in a retention pond at Enbridge's facility. It said part of the line will reopen later in the day. Seaway Crude Pipeline Company is a joint venture of Enterprise Products Partners and Enbridge Inc.

News of the leak dragged benchmark U.S. crude prices lower on worries the shutdown of the nearly 1 million-barrel-per-day Seaway pipeline system would bottle up barrels in storage in Cushing. U.S. oil markets are sensitive to changes in storage levels at Cushing, where the international benchmark price is set. The main 400,000 barrel 30-inch diameter legacy line was shut following the discovery of the leak. A parallel line with a capacity of 450,000 bpd, known as the Twin Line, was also shut as a precaution, limiting a total of 850,000 bpd of flows out of Cushing temporarily. The Twin Line is expected to be back in service later on Monday morning, Enterprise said in a statement.

The spill comes at a time of concern and debate by environmental activists and energy firms over the issues of pipeline safety and security. Climate-change activists earlier this month disrupted the flow of millions of barrels of crude from Canada to the United States, in support of a Native American tribe protesting the construction of the controversial Dakota Access crude oil pipeline. The Standing Rock Sioux Tribe has protested the construction of the $3.7 billion Dakota Access pipeline that will carry oil from North Dakota to the U.S. Gulf Coast, over fears of potential damage to sacred land and water supplies.

Benchmark U.S. crude futures fell about 1.2 percent in midday trading, while international benchmark Brent crude futures fell about 0.8 percent. The news also pushed the discount between front-month U.S. crude futures and the second-month to the widest in nearly two months. The prompt crude spread, often correlates to the supply-demand balance in Cushing. The November/December cash roll, which trades in the three days following the expiration of the prompt futures contract and allows traders to roll long positions forward, fell by about 10 to 15 cents, trading at minus 45 cents a barrel, dealers said. Meanwhile, on the U.S. Gulf Coast, WTI at Magellan East Houston was bid and offered at between a 70-cent a barrel and $1.15 a barrel premium to U.S. crude futures. On Friday, it traded at a 90-cent a barrel premium to U.S. crude futures, trade sources said.

Enterprise said on Monday there was no threat to the public and no evacuations were ordered following the spill, located near the intersection of Lynnwood Avenue and Texaco Road in Cushing. The company was working with emergency responders and law enforcement to address the situation. A spokeswoman from the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) A said the organization was aware of the spill and officials were despatched to take corrective measures and relief.

 

(Reporting by Devika Krishna Kumar in New York and Liz Hampton in Houston; Additional reporting by Arpan Varghese and Karen Rodrigues in Bengaluru; Editing by Simon Webb and Bernadette Baum)

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