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WTI Cushing-WTI Midland Spread Continued to Widen

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WTI Cushing-WTI Midland spread

In the week ending July 6, the WTI Cushing-WTI Midland spread, a key indicator to watch for Permian producers and pipeline MLPs operating in the region, widened for the second consecutive week. The spread between the two widened to $12.8 per barrel by the end of last week—compared to $12.3 per barrel the previous week.

Strong crude oil prices should lead to higher producer activity, which would reinforce concerns about pipeline constraints in the region. According to Baker Hughes, the region saw an addition of one rig last week—compared to the previous week. Overall, the region has seen an addition of 32 rigs since the end of the first quarter. The Permian region has the maximum drilled but uncompleted well inventory among all of the US shale regions.

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Impact on pipeline MLPs

The recent widening of the WTI Cushing-WTI Midland spread is negative for Permian producers. Midstream MLPs operating in the region benefit from higher transportation and logistics volumes due to the spread widening.

Enterprise Product Partners (EPD), Magellan Midstream Partners (MMP), Plains All American Pipeline (PAA), and Energy Transfer Partners (ETP) have been bullish on a strong increase in Permian volumes. The companies have announced several projects in recent quarters.

Next, we’ll discuss the best-performing MLPs last week.

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