By Nia Williams and Matthew Robinson
CALGARY, Alberta, Oct 2 (Reuters) - The southern portion of TransCanada Corp's Keystone XL oil pipeline is 95 percent complete and the company is focused on the line starting by the end of 2013, a TransCanada spokesman said on Wednesday.
Rumors the line could be delayed into 2014 have dogged the North American crude market in recent weeks. TransCanada's comments that the line would start on schedule helped narrow international Brent crude's premium to U.S. oil futures by nearly 70 cents to around $5.20 in afternoon trade.
Initial capacity on the Gulf Coast pipeline, which will ship crude from the Cushing, Oklahoma, delivery point of the U.S. oil futures contract, to Nederland, Texas, will be 700,000 barrels per day, expandable up to 830,000 bpd, TransCanada spokesman Shawn Howard said.
He declined to discuss volume commitments on the line from customers, but added it was "overwhelmingly subscribed".
The market has been focused on the start up of the pipeline to provide another conduit to the Gulf Coast refining center for inventories of crude that swelled to record levels earlier this year at Cushing on surging production from Canada, North Dakota and Texas.
"Once construction is done there's commissioning work that has to take place and continued testing. That will take some time. The end of the year is what we are focused on," Howard said, in response to questions about when shipping would start.
In an April filing with the U.S. Federal Energy Regulatory Commission, TransCanada said early leased capacity on the pipeline would be "approximately 400,000 bpd."
TransCanada's year-end target is unchanged from previous progress updates.
Traders have been tracking the line's progress as it could significantly speed the draw of crude oil stocks at Cushing and push WTI prices higher.
The start up of the Keystone Gulf Coast line, adding to capacity from other pipelines such as Seaway that are already moving crude out of or bypassing Cushing, could narrow the spread even further as inventories at the hub draw down further, according to Morgan Stanley.
"The structural crude shortage in Cushing will only worsen with the addition of new pipelines in late 2013 and 1Q14," the banks said in a research note.
"With the Gulf Coast oversupply likely to take longer to play out and no need for spot barrels to flow out of Cushing until late 2014 at the earliest, WTI should trade much closer to Brent for most of 2014, and potentially at a premium in 1H14."
Cushing inventories have plunged by nearly 17 million barrels over the past 13 weeks as pipelines send more crude to Gulf Coast refiners, creating fears that another glut could be built up in the Houston area.
Another TransCanada spokesman, Grady Semmens, told Reuters the initial delivery location will be Sunoco Logistics Partners LP's Nederland terminal in Texas. Semmens said TransCanada has been in discussion with a number of customers about possible connections to the Gulf Coast pipeline, but declined to give specifics.
However, in September Valero Energy Corp said in an SEC filing for subsidiary Valero Energy Partners, that a 400,000 pipeline connecting the TransCanada pipeline to Valero's Lucas storage terminal would be put into service during the first quarter of 2014.
The Lucas Storage terminal is connected to Valero's Port Arthur plant, and the refiner has taken a minimum quarterly throughput commitment of 45,000 bpd, which could be increased to 150,000 bpd if the complete Keystone XL pipeline is built.
Semmens also told Reuters construction on the 48-mile Houston lateral project pipeline, that will transport crude from the Keystone Gulf Coast line to refineries in the Houston area, would start in the fourth quarter of 2013. Completion is scheduled for late third quarter to early fourth quarter 2014.