Canadian Heavy Crude Declines on Increasing Alberta Production

Canadian heavy crudes weakened amid concern that increasing supply will overwhelm pipeline capacity out of the oil-producing regions of western Canada.

Western Canada Select, a heavy blend mainly produced from oil-sands bitumen, declined $3 a barrel to $36 below U.S. West Texas Intermediate, according to Calgary oil broker Net Energy Inc. Cold Lake, a heavy conventional blend, fell $3.50 a barrel to a $39.50 discount.

Several pipelines carrying Canadian crude to the U.S. are full, including parts of the Canada’s largest export system, Enbridge Inc.’s 2.5 million barrel-a-day mainline.

Enbridge’s Lines 6A and 62 are overbooked by 10 percent this month, and demand on Line 5 is 12 percent above capacity, according to a company statement. Lines 6A and 62 can carry up to 739,000 barrels a day, and Line 5 can ship as much as 491,200 barrels a day, according to the Enbridge website.

Suncor Energy Inc. said today oil sands production in Alberta surged 23 percent in December from the previous month to 385,000 barrels a day.

A new heavy oil project, Imperial Oil Ltd.’s 110,000-barrel-a-day Kearl mine in Alberta, is expected to begin production early this year, meaning more supply will have to travel through limited pipeline space.

Canada exported 2.3 million barrels of oil a day during the third quarter of 2012, up 4.5 percent from the same period a year earlier, according to the National Energy Board.

BP Whiting

BP Plc also delayed until at least June the conversion of its largest crude unit at the Whiting, Indiana, refinery to heavy oil production, a person familiar with the matter told Bloomberg News Dec. 14. The 225,000 barrel-a-day unit makes up about 6 percent of Midwest refining capacity, its conversion is expected to increase demand for heavy Canadian crude.

Syncrude, a synthetic light oil derived from bitumen, weakened by $1 to a $1 premium to WTI, according to Net Energy data, as an upgrader that produces the grade neared the end of maintenance.

Work at Nexen Inc.’s Long Lake upgrader in Alberta is “wrapping up,” company spokeswoman Patti Lewis said in an e-mail today. Long Lake produced about 34,000 barrels a day at the end of October, according to the company’s third-quarter earnings release.

WTI on the spot market in Midland, Texas, the pricing point for Permian Basin crude, strengthened $3.50 to a discount of $10.50 a barrel to the U.S. benchmark at 4:05 p.m., according to data compiled by Bloomberg.

West Texas Sour crude in Midland, a light, high-sulfur oil, narrowed its discount by $2.50 to $13.50 a barrel.

Along the Gulf Coast, Light Louisiana Sweet was steady at $18.75 a barrel over WTI in Cushing, and Heavy Louisiana Sweet gained 5 cents to an $18.80 premium. Mars Blend slipped 10 cents to a $13.80 premium.

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