Syncrude Discount Reaches Widest Level This Year on Plant Work

Syncrude reached the weakest level this year against West Texas Intermediate on expectations that demand will decline as U.S. and Canadian refineries process less. Other Canadian oils also weakened against the benchmark.

Several refineries and upgraders in Canada and the U.S. Midwest and Gulf Coast regions are shutting down part of their operations for maintenance in October. Refinery utilization rates typically decline in September and October.

Syncrude, a Canadian light crude processed from oil-sands bitumen, weakened by $1 to a $3.75-a-barrel discount to U.S. benchmark West Texas Intermediate oil, according to Calgary oil broker Net Energy Inc. It was the weakest level since Nov. 28, according to data compiled by Bloomberg.

“Refineries in general are planning for more maintenance heading into October, which suggests that less oil demand is going to be on the market at that point,” said David Bouckhout, senior commodity strategist at Toronto-Dominion Bank in Calgary.

Other Canadian grades also weakened. The discount of Western Canadian Select, a blend of heavy oil-sands bitumen, to WTI widened by $1 to a $26.75. a barrel, Net Energy said. It was the steepest discount for the grade since March 4, according to data compiled by Bloomberg. Conventional light, sweet oil at Edmonton lost $1 a barrel to trade at a $9.50 discount to WTI, Net Energy said.

Refineries including BP’s 420,000-barrel-a-day plant in Whiting, Indiana, are shutting down units for work. The plant is shutting a 75,000-barrel-a-day crude unit for 30 days of repairs starting in the third week of September, according to IIR Energy, a Sugar Land, Texas, energy information provider.

Northern Tier

In the U.S. Midwest, Northern Tier Energy LP’s 74,000-barrel-a-day St. Paul Park refinery in Minnesota plans to halt a fluid catalytic cracker during October, the company said during its earnings conference call in August.

Suncor Energy Inc. said it began in early September four to five weeks of maintenance at its Fort McMurray, Alberta, upgrader that will reduce production by 50,000 to 60,000 barrels a day.

Delek US Holdings Inc. is planning a shutdown of an alkylation unit at its 60,000-barrel-a-day Tyler, Texas refinery during October, according to a person familiar with the matter.

The U.S. refinery utilization rate was 92.5 percent last week, according to the Energy Information Administration, versus the 85.6 percent five-year average for this time of year. October gasoline crack spreads, or the profits refiners make, have declined this month.

“That could also be weighing on some of the physical crudes markets, the fact that refining margins are looking less appealing,” Bouckhout said.

Bouckhout said he expects the spread to narrow again later in the year as maintenance is completed and the Whiting refinery brings a new coker online that will increase demand for heavy crude.

Iain Conn, BP’s CEO of refining and marketing, said on July 30 that the new 250,000-barrel-a-day coker will come online in the middle of the fourth quarter.

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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