Texas' Next Crude Oil Bonanza -- WSJ

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The pipelines, all set to come online by the end of next year, mark a new phase in the U.S. oil boom. 

Hydraulic fracturing has pushed U.S. oil output to its highest level in 17 years, but without adequate pipelines, much of the crude has been trapped at storage facilities, including domestically produced light, sweet crude at the massive storage hub in Cushing, Okla. 

Because that Oklahoma crude is relatively stranded, its price is depressed compared with prices of oil stored in other parts of the U.S. and in Europe. But with the new pipelines, as well as increased use of rail cars and barges to move crude, Cushing prices are expected to rebound.

Light, sweet crude at Cushing is now trading at a discount of about $6 a barrel from imported European Brent crude, but far less than the $20 discount in February. Goldman Sachs Group Inc. says the discount could narrow to $5 by the third quarter as more pipeline capacity becomes available.

Another nail in the Keystone XL coffin. 

"We think the U.S. Gulf Coast gets saturated" with U.S. and Canadian crude once the pipelines are completed, said Greg Garland, CEO of Phillips 66, the independent refiner which spun off from ConocoPhillips last year. If that occurs, Mr. Garland said more crude will instead have to move to the East and West coasts by rail. 

The arrival of more U.S. light, sweet crude on the Texas coast is displacing imports of similar crude from Nigeria and Angola, which dropped to their lowest levels in about a quarter of century last year, a concern that was aired at the most recent OPEC meeting in May.