Canadian synthetic oil surged to an eight-month high on the spot market as an oil-sands plant began maintenance earlier than expected.
The 350,000-barrel-a-day Syncrude upgrader began work on a coker that had been scheduled for the second half of the year, Canadian Oil Sands Ltd., the project’s largest owner, said in a statement.
Syncrude, a light crude from oil-sands bitumen processed in an upgrader, surged by $8.25 a barrel, the largest one-day jump since March 14, 2012, according to data compiled by Bloomberg. The grade traded $11.75 a barrel above U.S. benchmark West Texas Intermediate oil as of 11:34 a.m. New York time, the biggest premium since Sept. 19.
“Seeing as this is a surprise, refineries may not have extra supplies stockpiled, so we’re likely to see a premium for Syncrude, as well as other like blends such as Bakken oil,” David Bouckhout, senior commodity strategist at Toronto-Dominion Bank in Calgary.
Syncrude maintenance has been moved up because there was reduced output at the plant after a boiler was shut down for unplanned repairs in May, Canadian Oil Sands said in today’s statement. The coker turnaround is expected to last 50 days.
Other northern light grades also jumped. Edmonton Sweet conventional oil for July delivery strengthened by $5.50 a barrel to a $1.75 premium to WTI, according to Calgary oil broker Net Energy Inc. North Dakota Bakken oil for delivery to Clearbrook, Minnesota, rose by $3.25 to a premium of $2.
Bouckhout said Syncrude prices should get extra support over the 50-day outage. He said the gain today would probably recede. Syncrude’s average premium to WTI over the last 12 months is $2.09 a barrel, according to data compiled by Bloomberg.
“It’s likely that we will see some calming of this, a little bit of retracement after the dust has settled,” he said.
Canadian crudes have been strengthening since mid-May on the expectation of more demand as Midwest refineries return from maintenance and increase output for the North American driving season.
Exxon Mobil’s Joliet, Illinois, refinery is expected to restart this month after maintenance that began in mid-April. BP Plc’s Whiting, Indiana, plant is said to be planning to finish converting a crude unit to process heavy crude this month as well. The Joliet plant can process 238,000 barrels a day and Whiting 420,000.
Western Canada Select heavy oil for July delivery increased by $2.25 a barrel today to a $12.75 discount to WTI, narrowed nearly in half from a $24.25 discount on May 6.
U.S. refinery utilization rates increased by 2 percentage points to 88.4 percent last week, according to data from the Energy Information Administration.