U.S. Refiners May Soon Purchase More Canadian Crude

Canada’s benchmark heavy oil price could soon see a boost as U.S. refiners are expected to return to buying large volumes of Canadian crude once the massive releases from the Strategic Petroleum Reserve (SPR) by the Biden Administration end in October, traders and analysts tell Reuters.

The U.S. Administration authorized in March the release of 1 million barrels per day (bpd) from the SPR over a period of six months in a bid to lower oil prices and potentially boost domestic production through contracts with companies to purchase future oil at fixed prices. The SPR releases are a response to the disruption of global oil markets caused by Russia’s invasion of Ukraine and subsequent Western sanctions that have led to soaring oil and gas prices.  

Since the 180-million-barrel SPR release over six months is mostly of sour crude, the discount of Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands delivered at Hardisty, Alberta—relative to the U.S. benchmark WTI has widened this summer. 

With the expected end of the SPR releases next month, U.S. refiners are set to boost imports of crude from Canada and from other producers of sour and heavier crudes. 

“When the SPR releases finish, these refiners will look to lean harder again on Canadian barrels or seaborne imports,” Matt Smith, lead oil analyst for the Americas at Kpler, told Reuters.  

This would narrow the discount of the Canadian oil benchmark to the U.S. benchmark, analysts say.

This summer, the WCS discount has widened to $20 per barrel below WTI. Last year, the WTI-WCS price differential averaged $12.78 per barrel, according to the Alberta Energy Regulator. Before the market turmoil caused by the Russian invasion of Ukraine and the SPR releases in the U.S. in response to the high oil prices, the regulator expected the WTI-WCS price differential to average $14.00 per barrel this year.  

By Charles Kennedy for Oilprice.com

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