Canadian Oils Gain on Expectation of Rising U.S. Refinery Demand

Spot Canadian crudes strengthened versus futures amid speculation that U.S. refinery demand for Canadian imports will rise as plants finish maintenance.

Refinery utilization rates probably increased for a third week, to 87.5 percent of capacity, in the seven days ended May 10, up 0.5 percentage point, according to the median estimate from 10 analysts surveyed by Bloomberg News. The Energy Information Administration is scheduled to release its assessment tomorrow.

Syncrude, a light crude from oil-sands bitumen processed in an upgrader, strengthened to a 50 cent-per-barrel premium to U.S. West Texas Intermediate crude after trading at parity yesterday, according to Net Energy Inc., a Calgary oil broker. Western Canada Select heavy oil expanded by 25 cents to an $18.50-per-barrel discount.

Several U.S. Midwest refineries that take Canadian grades are restarting operations after maintenance. Exxon Mobil Corp. (XOM) is scheduled to end seasonal repairs on May 22 at the 238,000-barrel-a-day Joliet plant, shut since April 14. BP Plc (BP/) said on April 30 the 420,000-barrel Whiting plant will bring units back online during the second quarter and commission a new 102,000-barrel coker in the second half of the year.

Cushing Inventories

Oil buyers have been drawing from stockpiles at the Midwestern supply depot of Cushing, Oklahoma, where Canadian oil imports are stored, during the past two weeks, according to the EIA, the Energy Department’s statistical arm. Inventories fell 652,000 barrels to 49.1 million in the week ended May 3.

Canadian oil prices have regained ground after weakening when a fire broke out May 3 in the coker unit at Flint Hills Resources LLC’s 330,000-barrel-a-day Pine Bend refinery in Minnesota.

Western Canada Select jumped $3.50 a barrel yesterday to a $19 discount in the largest one-day move since March 8, according to data compiled by Bloomberg. The grade had lost $5 a barrel from May 2 to May 6, reaching its widest discount to WTI in two months.

Jake Reint, a Flint Hills spokesman based in Rosemount, Minnesota, didn’t respond to e-mails requesting an update on the status of the coker this week.

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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