USL - Permian Update: New Pipelines Loosen Constraints And Tighten Differentials
Wide Permian crude price differentials provided a boost to midstream earnings in 2019 as companies exploited arbitrage opportunities. However, as new pipeline capacity has come on-line, the Midland-Houston crude price differential has tightened and eliminated upside from spot shipments. With more pipelines still to come, the Permian should have more than ample crude takeaway capacity for the next few years. Today's Insights piece provides an update on the buildout of Permian crude pipelines and analyzes the impact of a more competitive environment on pipeline tariffs. Despite narrowing differentials, companies involved in constructing new pipelines will