Canada, Bakken Light Oil Jump as Supply Cut Meets Demand Surge
by Robert Tuttle
March 27, 2017, 5:06 PM CST March 28, 2017, 3:00 AM CST
- Synthetic crude highest in a year, Bakken strongest since June
- Oil-sands upgrader shuts, Dakota Access line prepares to start
Light crude surged in Canada and the northern U.S. after an oil-sands upgrader shut for maintenance because of a fire and Energy Transfer Partners LP said it was preparing to place the Dakota Access pipeline into service.
Synthetic crude’s premium to West Texas Intermediate futures jumped $1.45 to $4.70 a barrel Monday, the strongest in more than a year, data compiled by Bloomberg show. Bakken crude at Clearbrook, Minnesota, rose to a 25-cent premium to futures, the first since last June, from a 30-cent discount on Friday.
Supply of light synthetic crude into the U.S. Midwest from Alberta was curtailed at the same time demand for light oil was increasing to fill the 1,172-mile (1,886-kilometer) Dakota Access. Suncor Energy Inc. said flows out of the Syncrude upgrader, which can process 350,000 barrels a day of oil-sands bitumen into lighter oil, will resume at 50 percent capacity in April. Suncor pushed up work by a month after a March 14 fire. Once at full capacity, Dakota Access will be able to ship 570,000 barrels a day from North Dakota to Patoka, Illinois.
“That’s going to be a big reduction” of supply, Genscape analyst Carl Evans said by instant message Monday. He said that up to 130,000 barrels a day of synthetic output is offline because of the Syncrude shutdown.
Syncrude’s shutdown coincides with maintenance at Suncor’s own upgrader, reducing supplies by 30,000 barrels a day in the second quarter.
Both synthetic and Bakken, which is pumped from tight rock formations in North Dakota, are light grades that normally trade at a discount to West Texas Intermediate futures because they are produced in isolated locations and must be transported to refineries in the U.S. Midwest or along the Gulf Coast.
Canada’s Edmonton Mixed Sweet crude also strengthened, with the discount to WTI shrinking 70 cents to $1.65 a barrel, data compiled by Bloomberg show. The absolute price of synthetic, Bakken and Edmonton Mixed Sweet rose even as WTI futures fell 24 cents to $47.73 a barrel Monday.