Canadian Crudes Gain as U.S. Refinery Demand Hits 8-Year High

Canadian crudes strengthened on the spot market as U.S. refinery demand hit an eight-year high and supplies fell for the third straight week. The Syncrude project in Alberta was said to cut production estimates for July and August.

U.S. refinery crude oil inputs reached 16.2 million barrels a day last week, the highest level since August 2005, the Energy Information Administration said today. U.S. domestic output plus imports fell short of that amount at 15.2 million barrels a day.

Total U.S. stockpiles slipped to the lowest level since January as 6.9 million barrels were withdrawn from storage. Supplies in the Midwest, or PADD 2 region, where most Canadian imports are received, sank 1.41 million barrels to 110.2 million, the fewest since Dec. 7.

“The Midwest is short crude following Canada flooding and refinery restarts,” Adam Longson, an analyst with Morgan Stanley in New York, said in a note to clients this week. “Canada is slowly returning and the pace of draws should slow as early as next week.”

Western Canada Select for August delivery strengthened 95 cents a barrel to a $15.50-discount to U.S. benchmark West Texas Intermediate oil, according to Calgary oil broker Net Energy Inc. September delivery of the heavy bitumen blend gained 85 cents to a $20.75 discount.

Syncrude Reduction

The Syncrude oil-sands project in Alberta will produce a total of 1.1 million barrels less than expected in July and August, according to two people familiar with the matter, who asked not to be identified because the information wasn’t public.

August deliveries of Syncrude, a synthetic light oil from oil-sands bitumen, rose 55 cents to $3.50 premium to WTI, Net Energy said. July contracts surged by $3.25 a barrel to a $8.25 premium.

Supplies from Canada, the U.S.’s largest source of imports, have been limited since record flooding in Alberta last month shut down pipelines. The country’s largest oil producer, Suncor Energy Inc., said yesterday it was back to full production.

Enbridge idled its oil-sands systems on June 22 after heavy rain caused the ground to shift under Line 37, which leaked 1,300 barrels of oil from Nexen Inc.’s Long Lake project. The northern portion of the Athabasca pipeline from Fort McMurray, home of Suncor’s oil-sands operations, was returned to full pressure as of July 11.

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