Bakken Oil Flows Hit 6-Month High as Rail to East Coast Drops

HOUSTON (Reuters) — Crude pipeline flows from North Dakota's Bakken shale field have climbed to the highest in six months after the June closure of the largest U.S. East Coast refinery cut crude-by-rail volumes, according to traders and market intelligence firm Genscape. 

The diverted barrels and rising production from the third-largest U.S. shale field are helping to offset some of the decline in supplies at the main U.S. storage hub in Cushing, Oklahoma, and adding to crude flows to the U.S. Gulf Coast, traders said.

Crude inventories at Cushing last week dropped to 42.3 million barrels, from 52.5 million barrels in June, according to the U.S. Energy Information Administration. Two new pipelines transporting crude from the Permian Basin of West Texas and New Mexico to the coast have reduced flows from West Texas to Cushing, traders and analysts said.

Before its June closure, Philadelphia Energy Solutions (PES) refinery had consumed a steady diet of about 40,000 bpd of crude transported by rail from the Bakken. Flows since the fire have stopped entirely, according to Genscape data.

Bakken pipeline volumes over the past eight weeks reached as much as 980,000 bpd, utilizing more than 90% of its takeaway capacity for the first time since February. That was up from 874,000 bpd in the three weeks before the PES fire, the data showed.

"Extra flows from the Bakken help replenish Cushing storage and offset some of the impact of Permian barrels redirecting" to the Gulf Coast, one U.S. trader said.

Crude production from North Dakota rose to a record 1.42 million barrels per day (bpd) in June, according to state data.

EPIC Midstream and Plains All American Pipeline LP last week opened new pipelines that move crude from the Permian to the U.S. Gulf Coast, narrowing the price spread between U.S. crude futures and global Brent, traders said.

U.S. crude's discount to Brent has narrowed to minus $4.59 a barrel, compared to minus $8.08 a barrel in June.

Kinder Morgan Inc's Double H pipeline transports crude from North Dakota and connects to Tallgrass Energy LP's Pony Express pipeline, which moves oil to Cushing.

Volumes on the Pony Express pipeline have risen to more than 400,000 bpd this week, up from about 350,000 bpd before the fire, traders said, citing Genscape.

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