Canadian crudes weakened on the spot market as U.S. oil stockpiles rose, potentially diminishing demand for shipments from the north.
Stockpiles of crude at the Cushing, Oklahoma, storage hub increased 889,000 barrels to 50.1 million last week, 10.6% above the five-year average, according to the EIA, the statistical arm of the Energy Department. Cushing inventories climbed to a record 51.9 million in January.
The price of Western Canada Select, a heavy oil blend of oil-sands bitumen, weakened by $1.25 a barrel to a $13.50 discount to U.S. West Texas Intermediate oil, according to Calgary oil broker Net Energy Inc. Syncrude, a light oil produced from oil-sands upgraders, weakened by 95 cents to a $7.75 premium to WTI.
“You are seeing a stockpile build-up in Cushing, and that build-up is going to impact the demand from other supplies, so there could be a decrease in the demand for Canadian oil as they work down the stockpile,” David Bouckhout, commodity strategist for TD Securities Inc., said in a phone interview from Calgary.
Western Canada Select is retreating from a six-month high versus WTI reached on April 5, according to data compiled by Bloomberg. The grade has strengthened amid a seasonal decline in output from Alberta during the so-called spring breakup, when warmer weather turns roads and drilling sites in remote areas to mud, slowing production.
The Canadian oil rig count dropped by 30 to 117 last week, down from this year’s high of 509 during the week ended March 1, Houston oil field-services company Baker Hughes Inc. said April 5.
Syncrude prices reached a six-month high April 2 on speculation supplies will decline as upgraders that produce the grade are being taken down for maintenance.
Suncor Energy Inc. said it will perform a seven-week turnaround at its 350,000-barrel-a-day Fort McMurray, Alberta, upgrader in April and May, and Canadian Natural Resources Ltd. said it plans to shut down its 110,000-barrel-a-day Horizon upgrader for 18 days in May. Royal Dutch Shell said April 4 its 255,000-barrel-a-day Scotford upgrader in Alberta was undergoing planned maintenance.