*

Cold weather impacts about 1.8 mln barrels of Permian

output -

analyst

*

Midwest refiners seek Midland crude to cut dependency on

Canadian light - analyst

*

U.S., Europe refinery maintenances cut demand at the coast

*

Narrow price differential between WTI Midland and MEH

expected

to be temporary - analysts to be temporary - analysts

By Arathy Somasekhar

HOUSTON, March 6 (Reuters) - The price spread between

WTI Midland crude in West Texas and Houston has narrowed this

year as cold weather hurt Permian production, driving up prices,

but weaker refinery and export demand on the U.S. Gulf Coast

pressured that market lower.

The spread between the two pricing points narrowed to 23

cents in March, the lowest since November 2023. That compared to

an average of 50 cents a barrel a year ago, when record crude

production at the top U.S. Permian oilfield and strong export

demand for WTI Midland crude widened price differentials.

WTI Midland crude traded at a $1.08 premium to U.S. crude

futures in March, easing from a 11-month high of $1.22 in the

previous month, data from pricing agency Argus showed.

The jump in prices in February came as 1.8 million barrels

in the Permian were cut by the recent cold weather that hit

operations, according to estimates from analysts at consultancy

Energy Aspects.

Meanwhile, Permian-quality crude at the Magellan East

Houston (MEH) terminal, the main price assessment point along

the Gulf Coast, traded at a $1.31 premium to U.S. crude futures.

That compared to a $1.47 premium last year.

A 10% tariff by the U.S. government on Canadian crude also

pressured the spread as Midwest refiners were seeking

WTI-Midland crude to Cushing to replace Canadian light sweet

oil, said Energy Aspects analyst Jeremy Irwin.

Permian to Cushing pipeline flows are tracking 100,000

barrels per day higher year-over-year for the first quarter,

Irwin said. Cushing inventories have been near operational lows

in recent months, but climbed to about 25.7 million barrels last

week, its highest level in four months.

Energy Aspects said it has increased its expectations for

flows on the BP 1 pipeline, which runs from Cushing to BP Plc's

Whiting refinery in Illinois and the Ozark pipeline,

which connects Cushing to refineries in Wood River, Illinois, as

inland refiners to pull more WTI Midland barrels given tariffs.

WEAK DEMAND ALONG THE COAST

Four-week average U.S. refinery utilization stood at 85.6%

in the week to February 26, data from the U.S. Energy

Information Administration showed, as fuel producers undergo

maintenance ahead of summer driving season.

Net input of crude oil to refiners on average over 4 weeks

to the last week was 15.5 million, 4.2% lower than average 2024

levels. Also capping demand was the final shutdown of

LyondellBasell Industries' ( LYB ) 263,776 barrel-per-day (bpd)

Houston refinery this month.

U.S. crude export volumes also eased 9,000 bpd to 3.88

million bpd in February, as spring refinery maintenance in

Europe cut flows, and as China implemented a 10% retaliatory

tariff on U.S. oil. China accounted for about 5% of U.S. crude

exports in 2024.

America's excess light-sweet supply is struggling to attract

international interest, pressuring MEH to soften to attract

international buyers, said Irwin.

The narrow price differential between WTI Midland and MEH is

expected to be temporary, however, Wood Mackenzie analyst Dylan

White said, as refinery maintenance season resolves through

spring, and on the back of strong Permian production growth and

increased use of available pipeline capacity.