Canadian crude prices are at their strongest in almost a year as U.S. refiners increase production just as oil sands operations shut for maintenance.
U.S. imports of Canadian crude fell last week as refiners ran at their highest rates in almost three months, according to Energy Information Administration data. Oil sands producers including Suncor Energy Inc., Royal Dutch Shell Plc and Syncrude Canada Ltd. plan “bigger than normal” maintenance shutdowns this month and next, Genscape Inc. said.
Oil sands operations typically slow for planned work in the spring and fall, when the ground isn’t frozen. Synthetic crude production this month will fall by 152,000 barrels a day from a year earlier, according to Genscape. May output will be down 72,000 barrels a day.
“Slowed production, that has a narrowing impact on the differential,” said Afolabi Ogunnaike, senior research analyst for Americas refining and oil product markets at Wood Mackenzie Ltd. “We do expect it to widen as the year goes on.”
Suncor, Canada’s biggest oil sands producer, said Feb. 5 it will shut its Firebag oil sands operation for four weeks next quarter, reducing bitumen output by 40,000 barrel a day. Two Suncor upgraders will also undergo second quarter maintenance, reducing the plants’ capacity to turn raw bitumen into light synthetic crude by 70,000 barrels a day.
Canadian synthetic crude, a light oil upgraded from the bitumen extracted from oil sands, traded $3.75 a barrel more than the U.S. benchmark West Texas Intermediate at 9:54 a.m. Mountain time Friday, the biggest premium since April 30, according to data compiled by Bloomberg.
Heavy Western Canadian Select, a benchmark for oil sands producers, was at $11.25 a barrel below WTI, the smallest discount in 22 months. WCS gained $1.11 to $40.00 a barrel Friday. WTI for May delivery rose 58 cents to $51.37 a barrel on the New York Mercantile Exchange.
U.S. refineries ran at their highest seasonal rates since at least 2006 last week, according to Energy Department data. Midwest refineries, the biggest consumers of Canadian crude, ran at 94 percent of capacity.
U.S. plants are poised to make gasoline at a record pace this year as they benefit from higher margins than last year after adding more than 100,000 barrels a day of capacity since last summer.
Shipments from Canada fell to 2.94 million barrels a day last week from 3.29 million the week before, the second highest in weekly records dating back to 2010.
Enbridge said Thursday that a new 36 inch crude pipeline from Edmonton to Hardisty will begin operation this month.
Canada derives most of its crude from the oil sands of Alberta, where bitumen is dug or melted with steam and pumped out of the ground. Some is processed in upgraders into lighter oil. The rest may be diluted into heavy crude that is shipped by pipeline or rail to refineries, most in the U.S.