Canadian Synthetic Oil Strongest in 6 Months on Upgrader Work

Canadian synthetic light oil strengthened on the spot market to its widest premium to West Texas Intermediate in six months as an upgrader that produces the grade began maintenance.

Production from Suncor Energy Inc. (SU)’s 350,000-barrel-a-day upgrader in Fort McMurray, Alberta, will be reduced as it begins 14 weeks of maintenance on a hydrogen plant at the facility late in the first quarter, the company said in its fourth quarter earnings release Feb. 5.

The Calgary oil sands producer also said it will completely shut down one of two primary upgraders at the plant for a planned turnaround lasting seven weeks in the second quarter. The work will reduce the supply of synthetic oil in the market.

Syncrude Sweet oil for April delivery strengthened by $1.35 to a $6.10 premium to U.S. benchmark West Texas Intermediate, according to Calgary oil broker Net Energy Inc. It was the biggest premium for the grade since March 4, according to historical data compiled by Bloomberg.

Western Canada Select, a heavy bitumen blend produced in Alberta, followed Syncrude higher, gaining $2.25 a barrel to trade at a $25.75 discount to WTI, according to Net Energy data.

Limited export pipeline capacity out of Alberta has been depressing the price of Canadian oils over the last several months, with Western Canada Select reaching a record discount of $42.50 a barrel on Dec. 14. With reduced output from the Suncor upgrader, there’s less competition for pipeline space.

Enbridge said Feb. 21 that the for the first time in six months there was no apportionment on export lines 4 and 67 to the U.S. Midwest from Alberta. The lines carry a combined 1.25 million barrels a day, and were apportioned for five months through February, meaning there wasn’t enough pipeline space to meet all requests to transport oil.

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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