Keystone Pipeline Is Shut Down After Oil Spills Into Creek in Kansas

Lucia Kassai and Devika Krishna Kumar / Bloomberg
Keystone Pipeline Is Shut Down After Oil Spills Into Creek in Kansas Keystone Pipeline is shut down after oil spills into a creek in Kansas. (photo: AP)

TC Energy Corp. declared force majeure on its Keystone oil pipeline system after an oil spill into a Kansas creek forced the company to shut the line, according to people familiar with the matter.

The massive crude pipeline, which can carry more than 600,000 barrels of oil from Canada to US markets, was shuttered Wednesday night.

West Texas Intermediate oil futures briefly jumped above $75 per barrel. Physical crude prices on the Gulf Coast also surged on expectations of tighter supplies following the outage.

A prolonged disruption would significantly tighten the availability of oil in Cushing, Oklahoma, the delivery point for benchmark US futures. Inventories at the hub are already at their lowest since July — and at multi-year lows seasonally — after refineries ramped up processing in response to strong gasoline demand. The outage comes at the end of a year in which record fuel prices have become a major domestic political issue.

The Keystone system begins in western Canada and runs to Nebraska, where it splits. One branch heads east to Illinois and the other runs south through Oklahoma and onward to America’s refining hub on the Texas Gulf Coast.

The spill follows several other leaks to hit Keystone in the past several years. The system was shut in October 2019 after it spilled thousands of barrels of oil in North Dakota.

Traders said they expect the latest outage to last upwards of a week since it affects a waterway, which can potentially complicate cleanup efforts. Calgary-based TC didn’t immediately provide an estimate of how much crude leaked or a timeline for a restart.

The Nebraska Department of Environment and Energy confirmed the incident occurred in Kansas. The Pipeline and Hazardous Materials Safety Administration, a federal regulator, said it deployed personnel to the site of an oil leak near Washington, Kansas, on Wednesday.

“PHMSA’s investigation of the cause of the leak is ongoing,” the agency said.

With refinery runs in the Midwest at their strongest since August, the US crude market could now get very tight. WTI rose as much as 4.8% before paring gains. It traded at $72.44 at 12:06pm. in New York. The nearest time spread for the benchmark surged as much as 53 cents into a bullish backwardation structure, a phenomenon that typically shows there’s concern about supply.

Physical markets in the US Gulf Coast are signaling tightness, too. Gulf Coast sour crude prices have risen in response to the outage. Mars Blend, a medium sour benchmark, strengthened by about 30 cents, according to Link Data Services.

In contrast, heavy crudes such as Western Canadian Select (WCS) in Canada declined by $4.70 a barrel, according to data from Bloomberg, as the outage threatens to back up more Canadian crude in the Hardisty area.

EXPLORE THE DISQUS SETTINGS: Up at the top right of the comments section your name appears in red with a black down arrow that opens to a menu. Explore the options especially under Your Profile and Edit Settings. On the Edit Settings page note the selections on the left side that allow you to control email and other notifications. Under Profile you can select a picture or other graphic for your account, whatever you like. COMMENT MODERATION: RSN is not blocking your comments, but Disqus might be. If you have problems use our CONTACT PAGE and let us know. You can also Flag comments that are seriously problematic.
Close

rsn / send to friend

form code