That's right, the two big Canadian pipeline companies, TransCanada and Enbridge, have recently built excessive amounts of pipeline capacity to Cushing, Oklahoma,and cheap Canadian oil is piling up in the storage tanks there. However, there is insufficient pipeline capacity to take it from Cushing to the Gulf Coast, so they can't load it on tankers and sell it in competition with Brent oil. The result is that the increasing volumes of Canadian oil are depressing the price of West Texas Intermediate, but not Brent.
Brent, on the other hand, is being forced up by increasing demand from China. There is currently no way to get the Canadian oil to China, so the price differential may persist for some time.
Both TransCanada and Enbridge are planning to build pipelines to the Gulf Coast, but it will 2013 before they start moving oil, at the earliest. In the interim, oil companies are thinking about using on the railroad option. People may begin to see 100-car unit trains of Canadian oil rumbling past them on the way to a seaport (Gulf Coast or Pacific Coast) in the not too distant future.
RockyMtnGuy on January 29, 2011 - 1:43am |
