Bloomberg News

Canadian Crude Weakens as Pipelines Stretched by Rising Output

January 16, 2013

Canadian crudes weakened as the prospect of rising oil production from new projects threatened to worsen congestion on the country’s oil-export pipelines.

Production from Imperial Oil Ltd. (IMO)’s 110,000-barrel-a-day Kearl oil-sands mine is expected to start this winter, and several other expansions in Alberta are expected this spring.

Syncrude, a synthetic light crude produced from bitumen, fell $1.05 a barrel to 15-cents above U.S. benchmark West Texas Intermediate, according to Calgary oil broker Net Energy Inc.

Rising production from Alberta oil sands and Bakken shale wells has filled pipelines from Canada to the Midwest. Last week, Enbridge Inc. (ENB) cut space by 10 percent on two export pipelines out of Alberta carrying as much as 1.25 million barrels a day because of power outages and equipment failures.

Several Enbridge lines between the terminal in Superior, Wisconsin, and refineries near Chicago and Sarnia, Ontario, are filled to their limits this month, as rapidly increasing production from the Bakken joined the cramped system.

North Dakota’s Bakken fields produced 747,239 barrels a day during October, up 37 percent from the start of last year, according to the North Dakota Pipeline Authority.

Western Canada Select, a benchmark for heavy oil-sands bitumen, declined 25 cents to a $37-a-barrel discount to WTI.

Pipeline congestion, plus the delay of a coker conversion at BP Plc’s 420,000-barrel-a-day refinery in Whiting, Indiana, pushed Western Canada Select down to a record discount of $42.50 a barrel below WTI on Dec. 14, according to data compiled by Bloomberg. During the fourth quarter, WCS sold at an average discount of $26.87 below WTI, compared with $12.48 below a year earlier.

To contact the reporter on this story: Edward Welsch in Calgary at ewelsch1@bloomberg.net

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


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