Canada Heavy Oil Falls to Weakest in 7 Months as Kearl Ramps Up

Canadian heavy oil slid to the weakest level in seven months against the U.S. benchmark grade as Imperial Oil Ltd. (IMO) reported rising production from a new oil-sands project in Alberta.

The Kearl project is producing more than 80,000 barrels a day and is on track to reach its full capacity of 110,000 barrels by the end of the year, Imperial Oil Chief Executive Richard Kruger said today at the Barclays CEO Energy-Power Conference in New York.

Western Canadian Select, a heavy blend that is a price benchmark for oil-sands production, weakened by $1.75 a barrel to $29 below West Texas Intermediate, according to Calgary oil broker Net Energy Inc. It was the steepest discount for the grade since Feb. 5, according to data compiled by Bloomberg.

Imperial’s Kearl project adds more production to an export pipeline system that is already stretched by rising output from from the Alberta oil sands. The nation’s production will reach roughly 300,000 barrels a day next year, according to the Canadian Association of Petroleum Producers. The only new pipeline out of Alberta in the next 12 months is Enbridge Inc. (ENB)’s 120,000-barrel-a-day Alberta Clipper.

While the difference between the Clipper’s capacity and the increase predicted by CAPP will be made up by railroad shipments, the Canadian oil market will remain vulnerable to price swings, Tim Simard, head of National Bank of Canada’s commodities derivatives business, said at the Bloomberg Canadian Fixed-Income Conference in New York yesterday.

Montana Work

Also adding downward pressure to the Canadian heavy oil price, Calumet Specialty Products Partners LP’s refinery in Great Falls, Montana, has shut down for 30 days of planned maintenance, according to the Great Falls Tribune’s website. The 9,800-barrel-a-day plant processes Canadian heavy, Jennifer Straumins, Calumet’s president, said in an e-mail.

Syncrude, a Canadian light crude processed from oil-sands bitumen, weakened by 10 cents to a $4 discount to WTI, Net Energy said. Canadian conventional light, sweet oil at Edmonton weakened by 25 cents to a $10.25 discount.

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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