U.S. crude prices dropped sharply on Wednesday following news a key oil pipeline had restricted throughput, leading to expectations that supplies will swell at the Midwest delivery point for the contract.
As prices for international Brent crude held positive, U.S. crude plunged after shippers received notification that the newly expanded 400,000 barrel per day (bpd) Seaway pipeline had cut rates to 175,000 bpd.
The line, which was brought online earlier this month after the expansion was completed, ships crude from the Cushing, Oklahoma delivery point for the New York Mercantile Exchange's oil contract to the U.S. Gulf Coast, and the reduction was expected to increase further already plump inventories at the hub.
Brent's premium to U.S. crude West Texas Intermediate widened to over $17.50 a barrel, the highest level since Jan. 15, following the news. The spread had been narrowing after Seaway started up, alleviating a glut of crude at Cushing caused by rising output of U.S. and Canadian oil.
U.S. crude oil futures settled down $1.45, or 1.5 percent, at $95.23 a barrel, while Brent crude oil prices traded up 48 cents to $112.90 a barrel at 2:37 p.m. (1937 GMT).
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