The most prominent event happened last week was the announcement by Enbridge Inc. that it is buying from Enterprise 50% stake of the 805 km Seaway Pipeline of which the flow direction will be reversed. Crude will then be allowed to be transported from Cushing, Oklahoma to the US Gulf Coast. The Seaway pipeline will initially be able to carry 150K bpd by 2Q12, followed by an increase to 400K bpd by early 2013 after more pump stations are added. According to the CEO of Enbridge, 'the Seaway Pipeline reversal provides an early opportunity to offer Gulf Coast access to midcontinent producers and other crude oil shippers'.
The announcement sent WTI crude oil above 100 and narrowed the spread between WTI and Brent crude to as low as -9.29 on Wednesday before widening to -10.15 on Friday. The market speculated reversal of the flow direction would alleviate the logistical bottleneck between Cushing Oklahoma and the Gulf. Yet, the spread will likely continue to hover around this level so as to maintain the incentive for rail shipment out of the Mid-Continent to refineries in Texas and Louisiana.
Natural gas remained weak and the trend will likely remain so despite the rise in heating demand. The DOE/EIA reported that gas inventory increased +19 bcf to 3 850 bcf in the week ended November 11. Stocks were +14 bcf higher than the same period last year but +224 bcf, or +6.2%, above the 5-year average of 3 626 bcf.
Separately, Baker Hughes reported that the number of gas rigs fell -6 units to 871 in the week ended November 18. Oil rigs slipped -8 units to 1125 and miscellaneous rigs dipped -1 unit to 5, sending the total number of rigs to 2001 units. Directionally oriented combined oil, gas, and miscellaneous rigs fell -18 units to 213 while horizontal rigs dropped -5 units to 1147 and vertical climbed +8 units to 641 during the week.