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.
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.
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.
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.
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 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.
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
Western Canadian crude supplies are tightening because heavy rains slowed oil sands mining and a power outage cut Cenovus production.
U.S. crude inventories, including strategic reserves, have fallen by 79 million barrels since late February.
The outage temporarily took about 10% of Cenovus’ oil sands production offline.
Western Canadian crude inventories are at their lowest level since 2020.
The discount on Western Canada Select to WTI narrowed by approximately $4 since the end of May.
