Canadian heavy oil prices jumped on the spot market on speculation that the restart of refineries in the U.S. will reduce crude stockpiles and increase demand for imports.
U.S. crude stockpiles in the midwest storage hub at Cushing, Oklahoma, declined 1.3 percent in the week ended May 3 to 49.1 million barrels, the second weekly decline, according to Energy Information Administration data. U.S. refiners increased the amount of crude they processed by 3.2 percent to 15.2 million barrels a day, the most since January.
Western Canada Select heavy oil strengthened $4 a barrel to an $18.50 discount to U.S. West Texas Intermediate oil as of 1:15 p.m. New York time, according to Calgary oil broker Net Energy Inc. It was the largest one-day increase since Jan. 25, according to data compiled by Bloomberg.
“Refinery production is back on the rise in the U.S.,” Carl Larry, president of Oil Outlooks & Opinions LLC said in an interview from Houston. “That’s going to mean more draw-downs from Cushing inventories, which in turn is going to bring more down from Canada.”
Valero Energy Corp.’s 170,000 barrel-a-day McKee refinery in Texas is scheduled to restart following five weeks of planned maintenance that began in April. BP Plc said on April 30 the 420,000-barrel Whiting plant will bring units back online during the second quarter and commission a new 102,000-barrel coking unit in the second half of the year.
WCS prices have regained ground after weakening when a fire broke out May 3 in the coker unit at Flint Hills Resources LLC’s 330,000-barrel-a-day Pine Bend refinery. The grade lost $5 a barrel from May 2 to May 6, reaching its widest discount to WTI in two months, according to data compiled by Bloomberg.
Jake Reint, a company spokesman based in Rosemount, Minnesota, didn’t respond to e-mails requesting an update on the status of the coker this week.
Syncrude, a light crude from oil-sands bitumen processed in an upgrader, gained 60 cents to trade at parity to WTI, Net Energy said.
The EIA’s next oil stockpile release is scheduled for 10:30 a.m. New York time on May 15.