HOUSTON (Reuters) – Reversal of the Seaway pipeline will bring U.S. Gulf Coast refiners the cheaper Midcontinent crude oil that they have wanted for the last 18 months — maybe too much of it.

Cheaper light, sweet crude from the Midcontinent will be a big part of the 150,000 barrels per day the Seaway will bring to the heart of U.S. refining at Houston when it reaches planned initial capacity.

Feedstock costs on the Gulf Coast already are reacting to the reversal, which started over the weekend. Light Louisiana Sweet fell to a discount to world benchmark Brent after months of selling at a premium.

LLS refining margins for Texas and Louisiana refiners grew $1.95 a barrel last week as LLS premiums have fallen from around $16 over West Texas Intermediate to $13 and lower, Credit Suisse said in its weekly refining report.

But the result could be a mismatch of oil supply and refining capacity in the region, Credit Suisse said, noting refining light crude is different from refining heavy in important ways.

“We believe light sweet crude processing capacity in the Gulf could be overwhelmed by 2014-2015 unless crude finds an alternate route to the East or West Coast,” Credit Suisse said in its weekly refining report.

The reason is Gulf Coast refiners have geared themselves to handle heavy, sour crude in recent years because they expected lighter grades to decline. They also are receiving an unexpected surge of light crude from Texas’ Permian and Eagle Ford shales.

HOUSTON, May 21 (Reuters) – Reversal of the Seaway pipeline will bring U.S. Gulf Coast refiners the cheaper Midcontinent crude oil that they have wanted for the last 18 months — maybe too much of it.

Cheaper light, sweet crude from the Midcontinent will be a big part of the 150,000 barrels per day the Seaway will bring to the heart of U.S. refining at Houston when it reaches planned initial capacity. [ID:nL1E8GJ2AE].

Feedstock costs on the Gulf Coast already are reacting to the reversal, which started over the weekend. Light Louisiana Sweet LLS- fell to a discount to world benchmark Brent LCOc1 after months of selling at a premium.

LLS refining margins for Texas and Louisiana refiners grew $1.95 a barrel last week as LLS premiums have fallen from around $16 over West Texas Intermediate to $13 and lower, Credit Suisse said in its weekly refining report.

But the result could be a mismatch of oil supply and refining capacity in the region, Credit Suisse said, noting refining light crude is different from refining heavy in important ways.

“We believe light sweet crude processing capacity in the Gulf could be overwhelmed by 2014-2015 unless crude finds an alternate route to the East or West Coast,” Credit Suisse said in its weekly refining report.

The reason is Gulf Coast refiners have geared themselves to handle heavy, sour crude in recent years because they expected lighter grades to decline. They also are receiving an unexpected surge of light crude from Texas’ Permian and Eagle Ford shales.

HOUSTON, May 19 (Reuters) – The Seaway pipeline began pumping crude from Cushing, Oklahoma, oil tanks to the heart of the U.S. refining industry in Houston on Saturday, marking a historic shift in the way oil flows across the United States.

The first barrels went into the line about noon CDT (1700 GMT) Saturday and volumes were expected to increase within days to 150,000 barrels per day (bpd), spokesman Rick Rainey of operating partner Enterprise Products said by email. Enbridge Inc is a 50 percent partner in the project.

The startup is the first direct link from Cushing to the Gulf Coast, the biggest U.S. refining center. Cushing is the delivery point for the U.S. benchmark oil futures contract, which represents a blend of crudes from the Midwestern states. It has been landlocked in Cushing and steeply discounted to world prices as a result.

The first oil will take 12 days to reach Houston, 550 miles (885 km) south of Cushing, but market anticipation of the event already has lifted inland crude prices in North America, although analysts disagree how much and how fast prices will change with reversal of Seaway.

The spread between U.S. benchmark West Texas Intermediate and global benchmark Brent, similar crudes historically priced at near parity, narrowed to $15 from almost $19 Wednesday. It was as much as $28 late last year, costing U.S. and Canadian oil producers billions but boosting profits for Midwestern U.S. refiners.

The 669-mile (1,077-km) Seaway system, which goes to Freeport and Houston, opened in 1995 and historically flowed from the Gulf Coast to Cushing. But a surge in Canadian oil sands output and U.S. shale oil production rendered south-to-north flow unnecessary.

Interest in reversing Seaway to flow north-to-south intensified in the past 18 months as Cushing inventories surged and NYMEX WTI fell to unprecedented discounts. Cushing stocks hit a record 45 million barrels last week.

HOUSTON, May 17 (Reuters) – The first crude oil was expected to flow on the reversed Seaway pipeline this weekend, partners Enterprise Products and Enbridge Inc said on Thu rsday, a historic move to ease a Midwest oil glut and bring depressed North American crude prices closer to world market levels.

The startup skidded two or three days from the target of Thursday for restart of the 500-mile (805-km), 30-inch (76-cm) pipeline, which initially will deliver 150,000 barrels per day from the Cushing, Oklahoma, trading and storage hub to Houston in the heart of the main U.S. refining center.

The reversed pipeline is perhaps the clearest illustration to date of how the domestic boom in production of U.S. shale oil and Canadian heavy oil has upended infrastructure needs and spurred a series of high-profile expansions.

However, analysts caution that the impact of the Seaway reversal could be slow to hit U.S. oil markets, even after flows hit their target of 400,000 bpd in the first quarter next year.

“I don’t think this turns (West Texas Intermediate) into a bull market,” said energy analyst Tim Evans of Citi Futures Perspective in New York. “It’s a little bit of extra supply to the Gulf Coast, but it’s not going to leave the Midcontinent short.”

The line, which had operated northbound since 1995, was being recommissioned to flow southbound on Thursday, the target date for restart, and was expected to start flowing oil over the weekend, Enterprise and Enbridge said in a news release.

“It’s on schedule,” said Rick Rainey, spokesman for operating partner Enterprise Products, who had said earlier this week that startup would come “on or about May 17. It could be a day or two later.”

HOUSTON/NEW YORK (Reuters) – Just ahead of the Seaway oil pipeline restarting in reverse to clear a bottleneck of crude in the U.S. Midwest, Wall Street analysts have rarely been more divided over the outlook for one of the hottest oil market bets in years triggered by the glut.

For some like Goldman Sachs, the reversal of Seaway’s flow set for Thursday is a seminal moment, marking the first major pipeline to ship oil directly from the Midwestern trading and storage hub at Cushing, Oklahoma, to Houston in the country’s main refining center on the Gulf Coast.

Goldman and others say relieving swollen crude inventories at Cushing, the delivery point for the New York Mercantile Exchange’s West Texas Intermediate futures contract, should also ease the oil pricing anomaly that has roiled the market for 18 months — inland U.S. crude trading at an abnormally wide discount to seaborne Brent crude.

For others like Barclays, the reversal of Seaway by Enterprise Products (EPD.N: Quote, Profile, Research, Stock Buzz) and Enbridge Inc (ENB.TO: Quote, Profile, Research, Stock Buzz) is almost irrelevant. They say the bottleneck will persist at Cushing deep into next year as the rapid growth of oil production in the United States and Canada outstrips pipeline, railway and barge projects to carry it south.

Goldman analysts say the Seaway reversal will help narrow WTI’s discount to Brent to $5 a barrel by the year’s end, even before the line is expanded from 150,000 barrels per day to 400,000 bpd in early 2013.

The so-called transatlantic arbitrage for June futures, which has bounced between $27 and $7 over the past six months, widened to over $18 a barrel on Tuesday; for December futures, the spread was just over $13 a barrel. Over the previous decade, WTI and Brent have averaged near parity.

Analysts at Barclays disagree. Last month they raised their Brent price forecast and lowered WTI, creating an implied average spread of $15 for 2012, among the widest forecasts. They foresee a persistent WTI-Brent spread averaging $10 in 2013 and not returning to parity until 2020.

HOUSTON/NEW YORK, May 16 (Reuters) – Just ahead of the Seaway oil pipeline restarting in reverse to clear a bottleneck of crude in the U.S. Midwest, Wall Street analysts have rarely been more divided over the outlook for one of the hottest oil market bets in years triggered by the glut.

For some like Goldman Sachs, the reversal of Seaway’s flow set for Thursday is a seminal moment, marking the first major pipeline to ship oil directly from the Midwestern trading and storage hub at Cushing, Oklahoma, to Houston in the country’s main refining center on the Gulf Coast.

Goldman and others say relieving swollen crude inventories at Cushing, the delivery point for the New York Mercantile Exchange’s West Texas Intermediate futures contract CLc1, should also ease the oil pricing anomaly that has roiled the market for 18 months — inland U.S. crude trading at an abnormally wide discount to seaborne Brent crude.

For others like Barclays, the reversal of Seaway by Enterprise Products (EPD.N: Quote, Profile, Research) and Enbridge Inc (ENB.TO: Quote, Profile, Research) is almost irrelevant. They say the bottleneck will persist at Cushing deep into next year as the rapid growth of oil production in the United States and Canada outstrips pipeline, railway and barge projects to carry it south.

Goldman analysts say the Seaway reversal will help narrow WTI’s discount to Brent to $5 a barrel by the year’s end, even before the line is expanded from 150,000 barrels per day to 400,000 bpd in early 2013.

The so-called transatlantic arbitrage CL-LCO1=R for June futures, which has bounced between $27 and $7 over the past six months, widened to over $18 a barrel on Tuesday; for December futures, the spread was just over $13 a barrel. Over the previous decade, WTI and Brent have averaged near parity.

Analysts at Barclays disagree. Last month they raised their Brent price forecast and lowered WTI, creating an implied average spread of $15 for 2012, among the widest forecasts. They foresee a persistent WTI-Brent spread averaging $10 in 2013 and not returning to parity until 2020.

HOUSTON, May 11 (Reuters) – BP has made the first offer to sell crude oil on the U.S. Gulf Coast from the glutted Cushing, Oklahoma, trading hub via the reversed Seaway pipeline, due to start next week, raising hope for stronger prices for Canadian and U.S. crudes, traders and brokers said on F rid ay.

Two 500,000-barrel cargoes of U.S. sweet domestic crude were offered in the cash crude market at a 50-cents per barrel discount to the price of global benchmark Brent crude, market sources said. BP declined comment.

Linking the price to Brent underlines the irrelevance recently of West Texas Intermediate futures for pricing crude on the Gulf Coast.

Details of the offers were unclear, and information about them was still unfolding. One question was whether they were for June or July delivery or both.

Surging production from Canadian oil sands and newer U.S. shale fields has flooded into Cushing, the delivery point for the New York Mercantile Exchange’s WTI futures contract, with no outlets to the Gulf Coast. The result, particularly in the past 18 months, has been steeply discounted WTI futures prices, against which Canadian and U.S. crudes price.

The crude being offered was for delivery in Texas at Jones Creek, the terminus of Seaway on the Gulf Coast, or at Texas City or “some other Houston area discharge port,” via pipeline links, sources said. Seaway branches to Texas City.

Traders and brokers have been waiting for outlets to open from Cushing to the Gulf Coast, historically the source not the destination of pipeline crude at Cushing. The idea is WTI prices will strengthen against Brent when WTI can reach the sea and world markets.

HOUSTON/ANCHORAGE, Alaska, May 8 (Reuters) – Tankers carrying Alaska North Slope oil to the U.S. West Coast are returning with some crude still on board because an unusual sequence of refinery shutdowns has reduced their ability to offload cargoes, industry sources said on Tuesday.

“There have been several so far this year, and I expect a couple more,” said BP spokesman Steve Rinehart, He was unable to say exactly how many or how often backhauls occur.

“It’s not unheard of, but it doesn’t happen very often.”

So far this year, six tankers laden with BP oil have returned to Valdez, the Alaska port that is terminus of the Trans-Alaska Pipeline and loading port for tankers, according to data kept by the U.S. Coast Guard Vessel Traffic Service.

A fire at BP’s Cherry Point refinery in Washington has affected the company’s shipments, but that plant is in the process of restarting and should be accepting Alaska crude normally by the end of May, Rinehart said.

“We think it’s a short-term thing,” Rinehart said. “We had a temporary reduction in Alaska North Slope crude processing capacity on the West Coast.”

Typically, partial cargoes can be sold to other West Coast refiners before returning to Valdez, industry sources said. But with a total of six West Coast refineries having maintenance or repairs done at the same time, there was either no alternative place to offload or the price offered was so low that backhauling made more economic sense, the sources said.

HOUSTON (Reuters) – A former BP Plc (BP.L: Quote, Profile, Research) engineer was arrested and charged on Tuesday with intentionally destroying evidence related to how much oil was spilling from the company’s broken well in the Gulf of Mexico in April of 2010, the U.S. Justice Department said.

Kurt Mix, 50, was accused of deleting text messages between him and a supervisor that included “sensitive internal BP information collected in real-time” as BP tried to stop the leak, the Justice Department said.

He was slated to appear before a federal magistrate in Houston on Tuesday afternoon.

Mix was charged with two counts of obstruction of justice for allegedly deleting records related to the amount of oil flowing from the Macondo well after the blowout. If convicted, he faces a maximum of 10 years in prison and a $250,000 (154,923 pounds) fine for each count.

The spill was found after BP’s troublesome Macondo deepwater well blew out, causing deadly explosions aboard Transocean’s (RIGN.VX: Quote, Profile, Research) Deepwater Horizon drilling rig that killed 11 men and sank the rig.

The biggest offshore oil spill in U.S. history spewed more than 4 million barrels of oil into the basin before BP capped it in mid-July 2010. The company killed the well two months later.

Mix, a drilling and completions engineer for BP before he resigned in January this year, worked on various efforts to stop the leak, including a “top kill” that involved pumping heavy mud into the ruptured well to try to push back the oil.

HOUSTON, April 24 (Reuters) – A former BP Plc engineer was arrested and charged on Tuesday with intentionally destroying evidence related to how much oil was spilling from the company’s broken well in the Gulf of Mexico in April of 2010, the U.S. Justice Department said.

Kurt Mix, 50, was accused of deleting text messages between him and a supervisor that included “sensitive internal BP information collected in real-time” as BP tried to stop the leak, the Justice Department said.

He was slated to appear before a federal magistrate in Houston on Tuesday afternoon.

Mix was charged with two counts of obstruction of justice for allegedly deleting records related to the amount of oil flowing from the Macondo well after the blowout. If convicted, he faces a maximum of 10 years in prison and a $250,000 fine for each count.

The spill was found after BP’s troublesome Macondo deepwater well blew out, causing deadly explosions aboard Transocean’s Deepwater Horizon drilling rig that killed 11 men and sank the rig.

The biggest offshore oil spill in U.S. history spewed more than 4 million barrels of oil into the basin before BP capped it in mid-July 2010. The company killed the well two months later.

Mix, a drilling and completions engineer for BP before he resigned in January this year, worked on various efforts to stop the leak, including a “top kill” that involved pumping heavy mud into the ruptured well to try to push back the oil.