The sharp drop in Canadian crude prices last week accelerated Monday amid reports of pipeline and storage restrictions, with the heavy crude benchmark Western Canadian Select at Hardisty falling to the lowest differential in more than three years.
WCS at Hardisty traded at the calendar month average of the front-month NYMEX light sweet crude futures contract (WTI CMA) minus $21.50/b Monday, sources said. That value would mark the lowest assessment for WCS at Hardisty since it reached minus $21.65 on July 31, 2014, S&P Global Platts data show.
Syncrude Sweet Premium, the light crude benchmark for Canada, was heard to trade at WTI CMA minus $2.25/b, a drop of $1.25/b from Friday and the lowest differential since it was assessed at minus $2.55 on December 5, 2016.
Mixed Sweet traded at minus $6/b, sources said, a drop of $1.50 from Friday and what would be the lowest assessment since August 18, 2015.
One trading source said Monday reports Enbridge had announced feeder restrictions for SSP had driven light grades lower Friday and Monday. An Enbridge spokeswoman said by email Friday that shipper notifications are private communications and the company does not discuss them publicly.
Trading sources last week cited several reasons for declining values for Canadian light grades, including increased production from Canadian Natural Resources Horizon oil sands project. The company said in November that Horizon would produce about 240,000 b/d of synthetic crude oil in December, compared with 156,465 b/d in the third quarter.
Heavy WCS at Hardisty is down more than $7/b since the temporary shutdown of TransCanada's Keystone pipeline on November 16 fueled oversupply concerns. The same grade at Cushing, Oklahoma, was talked at WTC CMA minus $8.60/b Monday, which would bring the spread with Hardisty to $12.90/b.
Sources have said that a spread of about $12/b between Cushing and Hardisty is needed to make shipping heavy Canadian crude to the Gulf Coast by rail economically viable. It costs about $12-$12.50/b to ship crude from western Canada to the Gulf Coast, including tariffs, fuel surcharges, unloading and renting the rail car.
