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Canadian Crudes Strengthen as U.S. Midwest Import Demand Rises

Canadian crudes strengthened on the spot market as a weekly report from the U.S. Energy Information Administration showed rising demand for imports in Midwest.

U.S. imports into PADD 2, or the Midwest, rose by 131,000 barrels a day last week, or 7.5 percent, the biggest gain since June 21, the EIA report today showed. Demand for Canadian oil may increase this fall as BP Plc (BP/) finishes converting a crude unit at its refinery in Whiting, Indiana, to process heavy oil.

Western Canadian Select for September delivery strengthened by 65 cents to a $22.95-a-barrel discount to U.S. benchmark West Texas Intermediate crude, according to Calgary oil broker Net Energy Inc. October delivery gained $1.25 a barrel to a $23.25 discount.

“June saw a huge increase in PADD 2 imports, then they fell in July and tracked lower,” said David Bouckhout, senior commodities strategist at TD Securities Inc. in Calgary. “The report this week saw imports jump back up, so that’s also lending a hand to the WCS differential.”

Some purchases of heavy oil to stockpile in preparation for BP Whiting’s conversion may also be supporting prices, Bouckhout said.

The Whiting refinery’s new coker will come online during the middle of the fourth quarter, Iain Conn, BP’s chief executive of refining and marketing, said during the company’s conference call last week.

Canadian Output

WCS had been weakening against WTI this month as Canadian producers such as Suncor Energy Inc. (SU) reported better-than-expected production and outlooks during the second quarter, potentially increasing supplies. Suncor said yesterday that its Alberta oil-sands output rose 33 percent in July to a monthly record of 390,000 barrels a day. WCS is down $3.70 a barrel against WTI since the start of the month, according to data compiled by Bloomberg.

Syncrude light oil, produced from oil-sands bitumen, also strengthened against WTI today, rising 60 cents to a $2.70-a-barrel premium for September delivery, Net Energy said.

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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