Houston (Platts)--20Nov2012/705 pm EST/005 GMT

West Texas Intermediate at Midland and West Texas Sour at Midland crudes' discount to the NYMEX light sweet crude contract fell to their lowest levels ever Tuesday, according to Platts data, stretching back to 1987.

On Tuesday, Platts assessed WTI Midland at a $21.50/b discount and WTS Midland at a $22.00/b discount to NYMEX light sweet crude contract or to WTI at Cushing, Oklahoma.

Increased production in the Permian Basin and the lack of sufficient takeaway capacity have dragged WTI Midland and WTS Midland to their lowest levels.

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The outright price for WTI Midland worked out to $65.14/b and $64.64/b for WTS, which are $13.11/b and $13.61/b lower, respectively, than Canada's Western Canadian Select heavy sour crude assessment at Cushing.

"WCS in terms of quality should be cheaper than WTS, but because of the lack of takeaway capacity WTS is weaker than WCS," a Gulf Coast crude trader said.

"Not only has the value of WTI Midland and WTS eroded, it has become one of the cheapest crudes in the US today. It needed to come down to attract buying otherwise production would need to shut-in," the crude trader said.

"This is how much the industry is saying it needs to move WTI Midland and WTS to the refining centers of Texas," a refiner said.

Permian Basin production is at about 1.1 million b/d while takeaway capacity is at about 900,000 b/d into Cushing. Production at the Permian Basin makes up 55% or more of Texas total crude oil output. In August, Texas produced just over 2 million b/d of crude, the highest since June 1988, according to the US Energy Information Administration.

On Monday, Magellan and Occidental announced that they will construct a 200,000 b/d pipeline to ship crudes from the Permian Basin to Houston. The BridgeTex line is expected to come into service mid-2014.

In addition, Magellan is reversing its 225,000 b/d Longhorn Line to ship Permian crudes to Houston. This line is scheduled to have its first shipment in early 2013.

"I am not sure if these pipelines will be sufficient to offer all the takeaway capacity needed only a decline in crude prices will slow down production and stop the decline in WTI Midland and WTI's value," the refiner said.

--Esa Ramasamy, esa_ramasamy@platts.com

--Edited by Jason Lindquist, jason_lindquist@platts.com

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