Western Canadian heavy crude’s price discount to WTI widened to the most in three years, at US$23 for the January contract and US$27 for the December contract, after Enbridge announced a new rationing of space in parts of its Mainline network, which is used to carry most of the crude Canada exports to the United States.
The rationing was prompted by unplanned outages in the network and will cause the accumulation of crude oil at storage hubs across Canada’s top oil producer, Alberta. Enbridge’s announcement for an apportionment on parts of the Mainline network is the second in as many months, sparking worry about a glut.
This accumulation comes on the back of the two-week suspension of TransCanada’s Keystone pipeline following a leak, which also caused a build of crude oil inventories in Alberta, pressuring prices. What’s more, Keystone, which has a capacity of almost 600,000 bpd, is currently running at 20 percent lower pressure, while environmental regulators investigate the leak, which totaled 5,000 gallons of crude.
Meanwhile, WTI is also enjoying a deeper discount to Brent, which yesterday soared above US$65 a barrel for the first time since 2015, after Ineos announced it was shutting down the Forties oil pipeline network for several weeks following the discovery of hairline fractures in parts of it. As a result, about 80 crude oil platforms in the North Sea will have to stop pumping oil. The Forties network, with a capacity of 450,000 bpd, carries to land about 40 percent of the UK’s North Sea crude oil production.
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Although WTI also inched up, to about US$58.40, its price increase was more modest than Brent’s. This means that the American crude will likely become even more attractive for bargain hunters in Asia, where it is already displacing the more expensive Brent-linked Middle Eastern crudes.
By Irina Slav for Oilprice.com
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