Canadian oil producers may soon see greater pricing for the petroleum they export into the United States, as a major south-to-north pipeline is nearing completion — an underappreciated event that might boost the domestic oil industry’s prospects.Marathon Pipelines LLC of Ohio submitted tariffs for crude oil transportation on its Capline pipeline from Patoka, Illinois to St. James, Louisiana for rates effective Oct. 25, according to RBN Energy, an energy markets consultancy.
Capline was the largest south-to-north flowing pipeline in the United States, with a capacity of 1.2 million barrels of oil per day, but owner Marathon Petroleum has been working since 2017 to reverse the flow, allowing both heavy and light oil to flow from a storage hub in the Midwest to a major refining center on the Gulf Coast. The reversal will be completed this year, according to the company’s website.
“They’re conducting line fill right now,” said BMO Capital Markets analyst Randy Ollenberger of the Capline, adding that the pipeline will reduce Western Canada Select discounts relative to West Texas Intermediate oil prices to 10 USD per barrel. A barrel of WCS rose 1.67 percent to US$67.08 on Thursday, implying a 15.50 USD discount to the WTI price of US$82.58 a barrel.
“We don’t know who has contracts on the Capline, but we believe that everyone profits from the spread.” “You don’t have to be physically shipping on the Capline to profit,” Ollenberger explained, adding that he expects to see the line’s influence on Canadian producers’ bottom lines in the second quarter of 2022.Oil producers contacted by the Financial Post said they expected the initiative to increase the value of their barrels.