As southbound pipeline capacity is built and there's less demand in the Midwest, West Texas Intermediate will stabilize and trade at about $7/b under Light Louisiana Sweet, an industry expert said at an event Friday.
Less demand for WTI, the NYMEX benchmark for light sweet crude, in the Midwest in the coming years will cause it compete more with LLS on the Gulf Coast, Neil Earnest, president of Muse Stancil and Company, said at the Argus Americas Crude Summit in Houston.
BP's modernization project at its 405,000 b/d refinery in Whiting, Indiana, will contribute to the waning demand for light sweet crude.
"The conversion of BP's Whiting refinery to run more heavy sour crude oil, the rising supply of Canadian and Bakken crude, is projected to displace WTI and other light sweet Midcontinent crude from the Upper Midwest by the end of 2013," he said.
Increased crude is projected to compete with Gulf grades due to Transcanada's Keystone XL pipeline, which is expected to be built in the next few years; Enbridge's Flanagan South pipeline from Illinois to Cushing, Oklahoma; TransCanada's Gulf Coast Project connecting Cushing to the Texas Gulf Coast; and Enterprise Product Partners and Enbridge's Seaway Pipeline going from Cushing to the Texas Gulf Coast.
By 2014-2015 Eagle Ford and other crudes will make their way via new southbound pipelines from Cushing and are projected to displace Gulf Coast light sweet waterborne crude imports.
Projected values for refined products will contribute to the WTI-LLS spread narrowing, Earnest said.
"LLS is distillate-rich while WTI is gasoline-rich," he said. "And projected stronger distillate prices versus gasoline prices in refining" adds value to LLS over WTI.
