Soaring oil production in West Texas is outpacing pipeline capacity, leading to bottlenecks and price drops.
On Monday, the bottlenecking caused oil for delivery at Midland, Texas to trade at $20 per barrel less than Light Louisiana Sweet, Reuters said.
According to the U.S. Energy Information Association (EIA), production at the Permian Shale Basin in West Texas is expected to grow for the sixth straight month in September.
Growth at the Permian is outpacing growth at Eagle Ford and Bakken.
The growth of pipeline infrastructure in West Texas has lagged behind the booming output.
“The bottom line is that the incremental growth is slightly more than the market expected,” Barclays Analyst Michael Cohen told Reuters.
The EIA expects the Permian Basin to produce about 1.72 million barrels per day in September, a 38,000 bpd rise over August.
A number of pipelines in the Permian Basin are being developed to relieve the bottleneck and catch transportation capacity up with production numbers.