Oklahoma oil producers are receiving a price closer to the international rate as the country's pipeline infrastructure catches up with boosted domestic supplies.
The shale oil boom that has swept across the country over the past five years has ramped up domestic oil production, cut into imports and moved the country closer to energy independence than it has been in nearly half a century.
But the growth happened faster than the country's pipeline infrastructure could handle.
As a result, hundreds of new storage tanks have been built in Cushing to hold oil for up to months at a time as it waited in line to move through pipes to refineries along the Gulf Coast and throughout the country.
West Texas Intermediate crude — the benchmark for domestic oil — is priced at Cushing. The glut over the past three years has led domestic oil to be discounted by up to $30 a barrel compared to the international Brent Crude price.
The price spread narrowed to $4.30 Tuesday, the lowest point in at least two and a half years.
The trend has provided a boost for domestic oil producers, said Jeff Hume, vice chairman of strategic growth initiatives at Oklahoma City-based Continental Resources Inc.
“It gives us a much better market,” Hume said. “We're starting to regain our historic position as being one of the strongest markets.”
WTI oil in many cases is preferred to Brent because it contains less sulfur and is lighter and easier to refine.
Before 2011, Brent and WTI prices tracked closely, with Brent prices typically trading at a slight discount to the domestic crude, according to the U.S. Energy Information Administration.
The trend is returning largely because infrastructure has caught up, allowing oil to flow more easily to refiners throughout the country.
In recent months the Longhorn Pipeline and Permian Express pipeline have been completed. Both lines move oil directly from west Texas to the Houston area, bypassing Cushing altogether. At the same time, BP PLC has expanded a refinery near Chicago, drawing additional oil north from Cushing.
Besides pipelines, companies also increasingly are using trains to move oil from the middle of the country to refineries on the east and west coasts.
“Rail is reaching markets that have not been reached by pipeline,” Hume said. “Now I don't think those markets want to go back to foreign oil if they can buy domestic.”
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It gives us a much better market. We're starting to regain our historic position as being one of the strongest markets.”
Vice chairman of