Canadian Heavy Crude Reaches Six-Month High Against WTI

Canadian heavy crude reached a six-month high near the end of February index trading as the starting date for a new pipeline to the Gulf Coast approached.

TransCanada Corp. (TRP)’s line to the Houston refining market from Cushing, Oklahoma, is scheduled to begin shipping oil on Jan. 22, ramping up during the year to as much as 700,000 barrels a day. Refineries on the Gulf Coast have specialized equipment to process heavy crudes.

Western Canadian Select heavy crude for February delivery narrowed its discount to U.S. benchmark West Texas Intermediate oil by 60 cents to $17.60 a barrel, according to Calgary oil broker Net Energy Inc. It was the third day of narrowing and the strongest price against WTI since July 19, the broker said.

Index trading for February delivery of oil shipments by pipeline ends today, with the March index period scheduled to begin on Feb. 1. Trading during the index periods sets the average price for exports arriving in the U.S. the next month.

Adding support to WCS prices was the restart of a coker unit that processes heavy oil at the 320,000-barrel-a-day Flint Hills Resources LLC’s Pine Bend refinery in Rosemount, Minnesota. The refinery restarted a coker on Jan. 15 after it spent two days offline, according to Louisville, Kentucky-based energy information company Genscape Inc. The refinery also shut down a different 24,000-barrel-a-day coker on the evening of Jan. 15, Genscape said.

Abnormally cold weather in Canada and the U.S. also helped to boost WCS prices at the beginning of the month from a $23 discount in December as freezing equipment hindered production.

Over-the-counter swaps trading showed a flat curve for WCS’s discount to WTI for several months, with the discount remaining near the current level of $18 through June.

Also on the spot market, Canadian Syncrude light oil produced from oil-sands bitumen weakened by 25 cents to a $1.40-a-barrel premium to WTI, Net Energy said. Conventional Edmonton Sweet oil narrowed its discount to WTI by 10 cents to $4.75.

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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