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Canadian Crude Strengthens as Refineries Prepare for Heavy Oil

Dec. 19 (Bloomberg) -- Heavy crude from Alberta strengthened for the fourth straight day as refineries in the U.S. Midwest prepared to process more of the thick oil.

Western Canadian Select, a blend of heavy crudes, gained $1.25 to a discount of $23.75 a barrel versus West Texas Intermediate, according to data compiled by Bloomberg. That’s the narrowest discount since Aug. 29.

BP Plc yesterday completed the commissioning of new units as part of a modernization project designed to allow its Whiting refinery in Indiana to process more heavy crude. The plant upgraded the largest crude unit and added a new coker, gasoil hydrotreater and sulfur plant.

“Once the coker is online, we expect the refinery to begin a three-month progressive transition to heavy feedstock, reaching full run-rate capacity during the first quarter of next year,” Bob Dudley, BP’s chief executive officer, said during an Oct. 29 conference call.

The 3-2-1 crack spread, a rough indicator of refining margins for producing fuel in Chicago from Canadian crude, was $31.36 a barrel, compared with $11.91 a barrel for making products from WTI.

Third Refinery

The Whiting plant is the third major refinery in the Midwest to undergo a makeover to take advantage of cheaper Canadian crude.

ConocoPhillips added a new coker in 2011 at the 356,000-barrel-a-day Wood River, Illinois, plant now owned by Phillips 66 and Cenovus Energy Inc. That increased heavy crude capacity by as much as 110,000 barrels a day, according to the company’s website.

Marathon Petroleum Corp.’s Detroit site finished work in 2012 that added a coker and upgraded other units to allow the 120,000-barrel-a-day plant to process an additional 80,000 barrels of heavy crude daily.

Syncrude, a light, sweet synthetic crude produced by upgrading oil sands bitumen in Canada, strengthened by 25 cents to a discount of $2.50 a barrel relative to WTI.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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