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US stockpiles and refinery supply will be affected by a major oil pipeline interruption

The Keystone pipeline, operated by TC Energy (TRP.TO), transports around 600,000 barrels of Canadian crude per day (bpd) to the United States. It was shut down late on Wednesday after a break released almost 14,000 barrels of crude into a Kansas creek, making it the country’s biggest oil disaster in almost a decade.

According to Michael Tran, managing director at RBC Capital Markets, “the key question remains to be the length of the potential outage… the longer the duration, eventually, of course, means either tighter inventories in Cushing or heavy (crude) on the Gulf Coast.”

Oil Pipeline Interruption

The storage hub in Cushing, Oklahoma, where the line directly terminates, is currently around a third full and holding close to 24 million barrels.

According to AJ O’Donnell, a director at pipeline researcher East Daley Capital, if the outage lasts more than 10 days, Cushing storage could be reduced to almost the operational minimum of 20 million barrels.

Harshit Gupta of Arc Independent Research said volumes in the fourth quarter will be “materially affected” because Keystone will probably operate, at least initially, at a significantly lower pressure. According to estimates by East Daley and data analytics company Wood Mackenzie, several pipelines connecting Canada and the United States are at or nearly at capacity.

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TC Energy Plans To Restart Pipeline

“There is insufficient space to take 600,000 barrels each day. Currently, there is just not enough pipe “explained O’Donnell.

Downstream from a crucial intersection in Steele City, Nebraska, where Keystone separates to go into Illinois, the leak in Kansas occurred. The other part of the line that was impacted by the leak won’t resume until regulators allow a restart, but that section of the line might.

According to sources cited by Bloomberg, TC Energy plans to restart a pipeline piece that transports oil to Illinois on Saturday and a pipeline segment that transports oil to Cushing on December 20.

Meanwhile, the pipeline’s reinstatement into service is being considered, according to TC Energy. Volumes from Cushing to the Gulf have already decreased. Following the discovery of the leak, Wood Mackenzie calculates that volumes on TC Energy’s Marketlink pipeline, which runs from Cushing to Nederland, Texas, decreased by about 300,000 BPD to less than 500,000 BPD.

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