Canadian heavy crude’s low cost to West Texas Intermediate futures elevated to the widest in nearly 5 years, elevating the specter of native oil producers curbing operations.
Western Canadian Select’s low cost for November fell $1.25 to $40.75/bbl Tuesday, the largest since November 2013, information compiled by Bloomberg present. The plunge got here as new provide from Suncor Energy Inc.’s Fort Hills mine helps to fill pipelines to capability.
“If you get this sustained broad differential, you will see these guys begin to ramp down manufacturing,” Mike Walls, a Genscape Inc. analyst, mentioned by telephone.
When reductions widened to $30/bbl early this 12 months on the again of a pipeline outage, firms together with Cenovus Energy and Canadian Natural Resources mentioned they had been reducing some manufacturing or beginning upkeep sooner than deliberate. Yet, with oil sands upkeep quickly to wind down and additional upkeep not deliberate till subsequent spring, there’s “no reduction valve for the following two to 4 months,” in line with Walls.
Other grades of Canadian crude are additionally struggling. Light artificial crude, produced from bitumen processed in an oil sands upgrader, fell to a $19.75/bbl low cost to New York futures on Tuesday as Syncrude Canada ready its upgrader subsequent month again to full manufacturing after a plant-wide shutdown in June. New pipeline tasks, together with the Trans Mountain growth to the Vancouver space, have been stymied by court-imposed delays.
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While growing volumes of oil are being shifted onto rail vehicles, the pickup in crude-by-rail has been gradual, Walls mentioned. Exports rose 1% in July from June to 207,000 bpd, National Energy Board information present. Cenovus mentioned final month it signed oil-by-rail agreements to ship about 100,000 bpd on tracks, however the agreements gained’t go into full impact till the second quarter subsequent 12 months.
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