Canadian oil companies suffer from glut of oil in U.S. storage.

While gas at the pumps is going up, there is also a glut of oil as more and more goes into storage at Cushing Oklahoma. The result is that the gap between the price received for Canadian produced oil and European Brent priced oil is increasing.

Senior oil analyst Roger McKnight notes::"Canadian oil sands are getting about a $30 US a barrel discount to West Texas Intermediate (WTI). Brent crude buyers are paying WTI plus about $15 a barrel," "The reason for that spread is there is nowhere for the stuff to go because of the bottleneck at Cushing, Oklahoma which is the trading end point." This explains why there is such a rush to complete a pipeline from Cushing to Texas and the Gulf Coast.

Inventories are accumulating at this storage point. The situation is exacerbated as production is increasing in Montana, North Dakota, and Saskatchewan. McKnight claims the glut will become worse. This may be bad news for the oil companies but it is at least possible the glut might drive the price of oil down. However, I would not count on it! For more see this BNN article.

Trans Canada to build pipeline from Cushing Oklahoma to Gulf of Mexico in Texas

Although the entire Keystone XL pipeline is not approved, Trans Canada is planning to start work on extending a pipeline from Cushing Oklahoma to a Texas port while it awaits approval for the part from Canada to Nebraska.

The segment to Texas will cost about 2.3 billion. There is a glut of oil at Cushing Oklahoma and the new segment would allow the oil to flow down to Texas. Although rejecting the Keystone application Obama did say he supported an expanded shipping capacity between Cushing and the Gulf.

Jay Carney said that Obama welcomes Trans-Canada's plans. He also noted that Trans-Canada's new application for an altered route through Nebraska would be thoroughly assessed. Carney noted:"We support the company's interest in proceeding with this project, which will help address the bottleneck of oil in Cushing that has resulted in large part from increased domestic oil production, currently at an eight-year high,". "Moving oil from the Midwest to the world-class, state-of-the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production." For more see this article.