The days of the Brent-WTI spread look numbered. TransCanada's (TRP)
decision to build the
Gulf
Coast
leg
of its Keystone XL pipeline independent of the rest of the project means a
firmer end now in sight to the massive gap between the two crudes, JPMorgan
says.
Rising domestic and Canadian production, coupled with lack of pipeline
infrastructure, has prompted WTI to trade at a steep discount to Brent and
other crudes for more than a year. Now, between the Gulf Coast leg of Keystone,
the coming reversal of the Gulf-to-Cushing Seaway pipeline, and new railroad
capacity, "takeaway capacity far surpasses incremental oil supply into the
Cushing 'pool,'" JPM says. Brent-WTI spread should narrow to $3/bbl by
4Q2013, firm adds. Spread recently at $15.27/bbl.