Canada oil outages and bad weather to tighten inventories at key US storage hub
SEATTLE (Oil Monster): Wet weather in northern Alberta and a power outage at a major oil sands producer are tightening crude export supplies from Western Canada, a development that could further strain inventories at the key Cushing storage hub in Oklahoma and at U.S. Midwest refineries.
Western Canada disruptions add to a tight global crude market
Supply issues in Western Canada are compounding an already tight global oil market as roughly one-fifth of global oil and gas shipments remain trapped behind the Strait of Hormuz amid the U.S.-Israel war in Iran. U.S. crude inventories, including strategic reserves, have fallen by 79 million barrels since the conflict began in late February, leaving stocks at Cushing near operational lows.
Canadian crude remains critical to U.S. refiners
Canada is the world’s fourth-largest oil producer and the largest foreign supplier of crude to the United States. Canadian barrels feed storage tanks at Cushing as well as refineries in the Midwest and Gulf Coast, with Midwest refiners especially dependent on oil sands crude because many facilities are configured to process heavier grades.
Heavy rains and Cenovus outage curb supply
Recent heavy rains in northern Alberta have slowed the pace of oil sands mining, while a power outage last week at Cenovus Energy’s Foster Creek and Christina Lake operations prompted the company to declare force majeure, according to three Reuters sources. An Energy Aspects research note said the outage temporarily took about 10% of the company’s oil sands production offline.
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Asian demand and Trans Mountain flows keep pressure on inventories
Canadian crude has also been in strong demand since the Iran war began, particularly among Asian buyers seeking secure and reliable supply. Canada’s Trans Mountain pipeline is now running at full capacity for the first time since its major expansion was completed two years ago, lifting exports to the Pacific Coast and overseas markets.
Western Canadian inventories hit lowest level since 2020
Western Canadian crude inventories have fallen to their lowest level since 2020, according to Wood Mackenzie analyst Lee Williams. He said inventories had declined by more than 4 million barrels over the prior two weeks and by nearly 8 million barrels since the end of February.
Heavy crude prices strengthen as discounts narrow
Canadian heavy crude prices have strengthened sharply over the past week and a half, with the discount on Western Canada Select to North American benchmark West Texas Intermediate narrowing by about $4 since the end of May. Cenovus did not immediately respond to a Reuters request for comment.
Courtesy: www.reuters.com
People Also Ask
Why are Western Canadian crude supplies tightening?
Western Canadian crude supplies are tightening because heavy rains slowed oil sands mining and a power outage cut Cenovus production.
How much U.S. crude inventory has been lost since the Iran war began?
U.S. crude inventories, including strategic reserves, have fallen by 79 million barrels since late February.
How much Cenovus oil sands production was temporarily taken offline?
The outage temporarily took about 10% of Cenovus’ oil sands production offline.
How low are Western Canadian crude inventories now?
Western Canadian crude inventories are at their lowest level since 2020.
What happened to the Western Canada Select discount versus WTI?
The discount on Western Canada Select to WTI narrowed by approximately $4 since the end of May.