Exxon Pipeline Leak Widens Brent-WTI Gap
Exxon Mobil (NYSE:XOM) has itself in another sticky situation: for the second time this month a ruptured pipeline has resulted in a significant spill. This time, damage wasn’t relegated to the wilderness, as crude oil was found flowing through the streets and pooling at the curbs of Mayflower, Arkansas.
The cause behind the leak is unclear. Alan Jeffers, spokesman for Exxon, said that the company had yet to excavate the area around the pipeline breach, a needed step before the company can estimate how long repairs will take and when the line might restart.
“I can’t speculate on when excavation will happen,” Kimberly Brasington, also a spokeswoman for the company, said in an e-mail. “Excavation is necessary as part of an investigation to determine the cause of the incident.”
The 20-inch Pegasus pipeline moves crude oil, originally from western Canada, from Patoka, Illinois, to the Texas Gulf Coast. It moves over 90,000 barrels per day, and about 12,000 barrels of oil and water have been collected so far near Mayflower, Arkansas, after “a few thousand barrels were observed in the area,” the Mayflower Incident Unified Command Joint Information Center said in a statement on Sunday. Any spill consisting of over 250 barrels is deemed to be a “major spill,” according to the EPA.
The city has evacuated 22 homes within the area of the spill as the company works with the town to facilitate cleaning. The holdup will slow the transport of oil from the midwest, potentially exacerbating a glut of oil coming from Canada and depressing U.S. prices relative to European contracts, Bloomberg said. U.S. stockpiles rose 0.9 percent for the week that ended on March 22nd, the highest point since last June, and 12 percent above the five-year average.
As a result, the disparity between West Texas Intermediate crude and London-based Brent has grown wider, after coming from its closest point in nine months. Last Thursday, March 28th, the spread stood at $12.78 between Brent and WTI. That increased to $14.37 as of 2:00 PM EST on Monday, a leap of $1.59.
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