The discount on Canadian heavy crude narrowed versus U.S. benchmark West Texas Intermediate (WTI) crude, and light oil sold at a premium on Wednesday, after the Syncrude oil sands site cut December production.
Canada’s Syncrude oil sands facility has reduced its December production by 1.6 million barrels because of operational problems, three market sources told Reuters, adding that the reduced output lifted Canadian prices.
Western Canada Select (WCS) heavy blend crude for January delivery in Hardisty, Alberta, was trading at $20.70 per barrel below WTI, according to NE2 Canada Inc, compared with Tuesday’s settle of $21.60 below.
WCS differentials are likely to narrow further as Enbridge Inc increases Mainline capacity by 100,000 barrels per day this month by commissioning the Canadian portion of Line 3, using drag reducing agents and making other improvements, Eight Capital analysts said in a note.
Light synthetic crude from the oil sands traded 25 cents above WTI, compared with Tuesday’s settle of 25 cents below.
Oil prices surged 4% on expectations that OPEC and allied producers would extend production curbs, and as U.S. government data showed a large drop in domestic crude stockpiles.
Canadian National Railway Co’s chief executive said crude-by-rail shipments may help earnings during the first three months of 2020, despite softer market conditions overall.
Expansion of Canada’s Trans Mountain oil pipeline accelerated just two weeks before a court hearing in British Columbia that will decide whether Prime Minister Justin Trudeau’s government can complete the project.
Gibson Energy Inc and US Development Group (USD) said they would build a diluent recovery unit at Hardisty, Alberta in a joint venture, allowing more crude to move by rail.
Canada’s two biggest oil producers are cautiously boosting spending next year despite congested pipelines and government production limits.