Global commodities trader Trafigura AG said on Monday it has started shipments of Permian basin crude to the Corpus Christi oil hub in Texas via the new Cactus II pipeline system.
Trafigura signed a long-term agreement with pipeline operator Plains All American Pipeline LP last year to transport a total of 300,000 barrels per day (bpd) of crude and condensate on the pipeline.
The company will be shipping full contractual volumes on the line, which has a capacity of 670,000 bpd.
The Cactus II line is likely to see flows of about 300,000 bpd through August, and is likely to be near capacity by September, market sources have estimated.
Trafigura is one of the biggest exporters of U.S. crude and routinely ships barrels overseas.
The Cactus II pipeline is the first of three large pipelines expected to start up this year from the Permian Basin, the biggest in the United States, and is expected to alleviate a bottleneck that had depressed regional prices for more than a year.
West Texas Intermediate (WTI) prices in Midland, Texas have strengthened to a premium compared with U.S. crude futures ahead of the pipeline’s startup.
On Monday, prices were seen at a premium of about 20-25 cents a barrel to futures, dealers said.
As Midland crude strengthens to a premium, traders also expect the arbitrage window to ship barrels to Cushing, Oklahoma, the delivery point for U.S. crude futures, to eventually shut.
Prices in Cushing have rallied over the past two weeks, with U.S. crude futures’ discount to Brent trading near $4 on Monday, the smallest since March 2018.