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Despite continued takeaway capacity constraints, Canada’s top two oil producers raised their production in the second quarter, as demand for heavy Canadian oil among U.S. Gulf Coast refiners has been rising at a time when Venezuelan heavy oil supply is dwindling.
Due to the transportation bottlenecks, the discount at which Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—trades relative to WTI has been US$20, and at times US$30 a barrel this year.
However, the desperate state of the Venezuelan oil industry has reduced heavy Venezuelan oil exports to the United States, and refiners are looking for more Canadian barrels to buy.
Cenovus Energy reported on Thursday a 61-percent surge in second-quarter production, to 518,530 barrels of oil equivalent per day (boed). Oil sands production jumped by 49 percent on the year to 390,000 bpd, and the company boasted record low oil sands operating costs of US$5.60 (C$7.32) a barrel.
“As WCS prices improved into the second quarter, the company ramped up its oil sands production to above normal operating levels to recover the stored barrels in a higher pricing environment,” Cenovus said today.
Referring to the market access of Canadian oil, Cenovus said:
“Cenovus continues to work with rail providers to resolve a shortage of locomotive hauling capacity, so the company can more fully realize the benefits of its Bruderheim crude-by-rail facility. The company is beginning to see increased activity at its Bruderheim facility as well as across other rail loading facilities in the province.”
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Another top Canadian producer, Suncor Energy, reported on Wednesday total upstream quarterly production of 661,700 boed in Q2 2018, compared to 539,100 boed in Q2 2017.
Husky Energy, however, chose to shield itself from the wide Canadian oil price discounts by boosting refining, and its upstream production dropped by 7.5 percent on the year in Q2.
“Once again, the physical integration of our Upstream and Downstream businesses, including our committed pipeline capacity, shielded us from location and quality differentials, and the stability offered by our term contracts in Asia delivered strong financial results,” CEO Rob Peabody said.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.