Seaway shipments lag on closed arbitrage, end-of-year taxes

HOUSTON, Nov 17 (Reuters) - Crude shipments on a major
pipeline from Cushing, Oklahoma to the U.S. Gulf Coast have
fallen sharply this week as a supply glut erodes price spreads
between the two locations and market players avoid lofty
end-of-year taxes in Texas.
Flows on Enterprise Products Partners EPD.N and Enbridge 's
ENB.TO 400,000 barrel per day Seaway pipeline from Cushing to
Freeport, Texas are essentially shut, according to a notice
published on Monday by energy monitoring firm Genscape.
The companies have not issued any notices alerting customers
to work on the line, according to two shippers and sources
active in the Cushing market, indicating that the reduced flows
are driven by price, not operational issues.
Enterprise declined to comment on whether the line was
experiencing operational issues.
Right now, there is so much crude on the Gulf Coast that
barrels arriving from Cushing would fetch fewer dollars for
sellers than if they stayed in Oklahoma.
West Texas Intermediate crude at the Magellan East Houston
terminal traded at a 35 cents a barrel discount to the WTI
benchmark on Monday, hardly enough to justify the $4 a barrel
tariff to move uncommitted barrels, which don't have long-term
supply contracts, from Cushing to points in Texas.
"The only reason to ship there is if you have committed
barrels," Sandy Fielden, Director of Energy Analytics at RBN
Energy, said.
Closed arbitrage to the Gulf Coast is adding to the supply
overhang at Cushing, pushing prompt West Texas Intermediate
(WTI) futures to steep discounts to the second month contract,
including a six-month low of $1.39 last week.
At the same time, hefty ad valorem taxes levied at the
year's end on inventory in Texas have prompted end-users to take
title of fewer barrels in the state, backing up barrels offshore
and at origin points feeding the Gulf Coast.
Energy research consultancy Energy Aspects has said an
armada of tankers in anchorage off the Gulf Coast stems from
"end of year taxes which incentivise refiners to hold off taking
crude."
Inventories at Cushing, Oklahoma are currently at 55.3
million barrels the week ended Nov 6, according to the Energy
Information Administration. On Monday, Genscape reported stocks
at the major trading and storage hub grew by another 1.2 million
barrels last week.