Wet weather and an influence outage at a serious oil sands producer have contributed to crude export supply tightness out of Western Canada, that might tighten supplies to the important thing Cushing storage hub in Oklahoma and to U.S. Midwest refineries.
Supply disruptions in Western Canada are adding to an already tight global market as a fifth of the worldwide oil and gas shipments are stuck behind the Strait of Hormuz resulting from the U.S./Israel war in Iran.
U.S. crude inventories, including those from strategic reserves, have fallen by 79 million barrels for the reason that Iran war began in late February, with inventories at Cushing nearing operational lows.
Canada is the world’s fourth-largest oil producer, and the most important foreign supplier of crude oil to the U.S., with the oil flowing into storage tanks at Cushing and to Midwest and Gulf Coast refineries.
The U.S. Midwest refiners, which don’t have any access to waterborne crude, are heavily depending on Canadian oil and most of the region’s refineries have been designed to handle oil sands crude.
Refineries within the U.S. Midwest, which don’t have any access to waterborne crude supplies, are heavily depending on Canadian oil and most of the region’s refineries have been designed to handle oil sands crude.
AP Photo/Charlie Riedel, File
But recent heavy rains in northern Alberta have temporarily slowed the pace of oil sands mining, while an influence outage last week at Cenovus Energy’s Foster Creek and Christina Lake operations prompted the company to declare a force majeure, three sources told Reuters.
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The ability outage temporarily took about 10 per cent of the corporate’s oil sands production offline, in keeping with an Energy Elements research note last week.
Cenovus didn’t immediately reply to a request for comment.
Canadian crude has also been in high demand for the reason that war in Iran began, especially from Asian buyers who see the country as a secure, secure source of supply.
Canada’s Trans Mountain pipeline, which transports Canadian heavy oil to the Pacific coast for export overseas, including to Asia, is running at full capability for the primary time for the reason that completion of a serious expansion two years ago.
Western Canadian crude inventories are at their lowest level since 2020, Wood Mackenzie analyst Lee Williams said.
“As of last week, Western Canadian crude inventories had decreased by greater than 4 million barrels over the past two weeks and by nearly 8 million barrels for the reason that end of February,” Williams said in an email.
Canadian heavy crude prices have strengthened significantly within the last week-and-a-half, with the discount on Western Canada Select to North American benchmark West Texas Intermediate narrowing by roughly $4 for the reason that end of May.
