Canada Heavy Oil Gains for Fourth Day as Bottlenecks Ease

Canadian heavy oil strengthened for a fourth day, reaching the narrowest discount to U.S. crude since October, as a pipeline bottleneck eased this month.

Apportionment on Canada’s largest oil export pipelines to the U.S., a measure of demand for space on the lines, declined for a third month in February as less oil from the U.S. Bakken fields competed with Canadian crude. Extra production from the Kearl oil sands project was delayed to the end of the first quarter, also freeing up space.

Western Canada Select, a blend of oil-sands bitumen, strengthened $3 to a discount of $25.50 a barrel against U.S. benchmark West Texas Intermediate at 1:55 p.m., according to data compiled by Bloomberg. The grade has strengthened by $6 a barrel this month, reaching its lowest discount since Oct. 24.

Enbridge Inc.’s Lines 4 and 67 transporting heavy oil from Alberta to the U.S. were apportioned by 7 percent this month, the lowest amount since September and down from 18 percent in November, the company said in a Jan. 29 notice to shippers. Apportionment is the amount of extra oil shippers ask to ship beyond a pipeline’s capacity. The level of apportionment can reflect oversupply in the market.

“If the Enbridge line out of North Dakota is running low, it means space on the mainline is free, so it seems likely it’s taking more volumes from the oil sands,” said Trisha Curtis, an analyst with the Energy Policy Research Foundation Inc. in Washington, D.C.

Bakken Shipments

Enbridge’s North Dakota system is “seeing reduced volumes” as producers sought other transportation options, a company spokesman in Calgary said in a Jan. 16 e-mail. The North Dakota Pipeline Authority said that in November that pipelines moved 38 percent of Bakken crude oil, down from 56 percent in April, with the remainder moving mostly by rail.

Exxon Mobil Corp. said Feb. 1 that the 110,000-barrel-a-day Kearl oil sands project in Alberta won’t begin production until the end of the first quarter and won’t reach full rates until the end of the year. The extra-heavy oil supply was expected to start in January.

Western Canada Select reached a record-low discount to WTI of $42.50 a barrel on Dec. 14 because of clogged pipelines and the delay of a heavy-crude conversion of BP Plc.’s Whiting, Indiana, refinery until the second half of this year. The plant had been expected to increase demand for Western Canada Select in March.

In the Gulf Coast, offshore oils strengthened. Light Louisiana Sweet’s premium to WTI widened 65 cents to $21 a barrel, and Heavy Louisiana Sweet gained 70 cents to trade at $21.15 a barrel over the benchmark.

Mars Blend gained 25 cents to $14.75 a barrel over WTI and Thunder Horse, a sour crude with lower sulfur content than Mars, gained 85 cents to a premium of $18.50. Southern Green Canyon’s premium weakened by $1.10 to $14.40.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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