Crude oil stockpiles in Cushing are at their lowest levels in two years after new pipeline projects have begun moving oil more easily to refineries along the Gulf Coast.
Despite the increased oil flow, the U.S. Energy Information Administration this week said the new pipelines — along with increasing domestic oil production — are expected to hold down the price of West Texas Intermediate crude, which is set in Cushing.
The pipeline projects have been expected to narrow the price gap between West Texas Intermediate and the international Brent crude price.
“EIA expects strong U.S. crude oil production growth will help reduce WTI prices to an average of $95 a barrel this year,” administration Administrator Adam Sieminski said as part of the updated Short-Term Energy Outlook.
The agency also said it expects the Cushing-priced crude to average $90 in 2015.
The Brent crude price is projected to average $105 a barrel this year and $101 next year, representing a premium of $10 a barrel in 2014 and $11 a barrel in 2015.
Domestic crude traded at a discount of as much as $30 a barrel before new pipeline projects began coming online last year.
Crude oil is a global commodity priced largely based on global supply and demand trends and geopolitical concerns.
Surging domestic production over the past few years, however, has led to discounted domestic prices, especially in areas like Oklahoma where supplies have increased faster than demand and pipeline infrastructure has been unable to easily move the oil to markets.
The new pipeline projects — along with an increasing reliance on rail — has allowed the oil to flow more freely.
The 485-mile-long Keystone Gulf Coast pipeline became operational in January, transporting up to 830,000 barrels per day from Cushing to the Houston area.
Enbridge Inc. and Enterprise Product Partners last year reversed their Seaway pipeline, which now flows from Cushing to the Houston area. The pipeline initially carried about 150,000 barrels per day. Capacity in January was boosted to about 400,000 barrels per day, and another expansion is expected to more than double capacity again by next summer.
At the same time, several other pipelines have been built or are under construction to carry oil directly from Texas’ Eagle Ford and Permian Basins to the Gulf Coast, bypassing Cushing altogether.