President Barack Obama announced plans Thursday to fast-track the southern leg of TransCanada's Keystone XL pipeline project -- a crucial piece of infrastructure that should help alleviate a glut of crude oil in the US Midcontinent region by enabling it to flow to refineries on the US Gulf Coast.
On the supply front, Bentek Energy, an energy consulting firm, is projecting that US Midcontinent crude oil supply will double to about 1.6 million b/d over the 2011-16 period, which along with increases in Western Canadian production will tend to dwarf new pipeline capacity out of Cushing.
Consequently, Bentek is forecasting that West Texas Intermediate (WTI) crude's discount to Brent will average $14/bbl over the next five years. This compares to roughly $7.40/bbl based on the current forward strips for Nymex/WTI and ICE Brent.
Bentek projects that Nymex/WTI's discount to Brent will remain around $18/bbl this year, but will decline in 2013 and 2014 as the new pipeline projects come on line. However, it is forecasting that Nymex/WTI will drop back into deep discounts to Brent in 2015 and 2016.
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