Heavy Canadian Crude Weakens on Signs of Tepid Refinery Demand

Western Canada Select crude weakened on speculation that demand from refineries isn’t sufficient to justify a rally of $17.50 a barrel over the past month.

BP Plc’s Whiting refinery in Indiana won’t be able to process heavy Canadian crude at full rates until 2014, Chief Executive Officer Bob Dudley said in the company’s fourth-quarter earnings call on Feb. 5. Consumers’ Co-Operative Refineries Ltd.’s Regina refinery in Saskatchewan shut two crude units, one of which is still down, after a Feb. 11 fire.

“The tightening was a bit overzealous, given that we still have all these refineries offline for maintenance,” said Katherine Spector, a commodities strategist at CIBC World Markets in New York.

The discount of Western Canada Select, an oil blend mainly produced from oil-sands bitumen,to U.S. benchmark West Texas Intermediate oil widened $1.50 to $24.50 a barrel at 10:23 a.m., according to Calgary oil broker Net Energy Inc.

The heavy crude had strengthened as delays to Exxon Mobil Corp.’s 110,000-barrel-a-day Kearl oil sands project left room on Enbridge Inc. pipelines that transport oil from Alberta to the U.S.

Gulf Coast crudes were mixed after the Energy Information Administration said U.S. oil output climbed to the highest level in 20 years.

Light Louisiana Sweet’s premium to WTI widened 10 cents to $20.60 a barrel at 2:03 p.m. New York time, and Heavy Louisiana Sweet’s premium was unchanged at $20.40, according to data compiled by Bloomberg.

Mars Blend’s premium fell 5 cents to $14.75 over WTI. West Texas Sour’s discount to WTI widened 60 cents to $4.10 a barrel. WTI in Midland gained 15 cents on WTI in Cushing to trade at a discount of 60 cents.

Syncrude, a synthetic light, sweet oil upgraded from bitumen, declined by 45 cents a barrel to a $2.30 premium to WTI at 11 a.m., Net Energy said.

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