Gasoline prices in Western Canada and the US Midwest have jumped due to supply issues surrounding the turnaround of Suncor's 135,000 b/d Edmonton, Alberta, refinery, industry sources said Thursday.
"Suncor's move to secure gasoline and other fuels from other suppliers, this led to a rise in prices," said a Calgary trader.
On April 10, Suncor began five weeks of planned maintenance at the Edmonton plant. On May 10, it said it was in the process of restarting operations. The refinery produces mostly gasoline and distillate fuels for markets in Western Canada.
On Thursday, Suncor said its Petro-Canada retail sites are "currently experiencing a reduction in gasoline inventory in Alberta, Manitoba and Saskatchewan," according to its online blog, PumpTalk.
Retail prices for regular grade gasoline in Calgary, including taxes, have risen to an average $1.31/liter ($4.95/gal) up on Thursday from C$1.11/liter on April 9, according to data gathered by MJ Ervin and Associates.
In a US knock-on effect, traders said Thursday that the run-up in Chicago 87-unleaded gasoline between May 1 and May 22 was in part due to increased product demand from Canada. Chicago 87-unleaded gasoline between May 1 and May 22 rose 9.57 cents to $3.0936/gal, Platts data showed.
"We are monitoring the developments and the supply side of gasoline in Alberta should improve once Suncor completes its maintenance work," said Bob McMannus, a spokesman at Alberta's Energy Department.
"Also, of late, there have been some refinery issues in the US Midwest and retail stations in Manitoba that have now turned to our province to secure supplies," said McMannus in a phone interview. "This has intensified the demand."
MIDWEST REFINERY MAINTENANCE
Both planned and unplanned refinery maintenance has limited US Midwest gasoline stocks, according to the Energy Information Administration.
"While resupply from the US Gulf Coast (PADD 3) is available via pipeline, transit time to the upper Midwest can be as long as three weeks," said EIA in its This Week in Petroleum report that was published Thursday.
The agency said US Midwest refinery utilization has "fallen steadily" since the beginning of the year and now stands at about 83% due to "a combination of routine seasonal turnaround and maintenance activity, unplanned outages, and longer-term upgrading initiatives."
EIA cited maintenance and outages at refineries that include: ExxonMobil Joliet, Illinois (239,000 b/d), Marathon Catlettsburg, Kentucky (233,000 b/d), Holly Frontier's El Dorado, Kansas (138,000 b/d) and Flint Hills' St. Paul, Minnesota(277,000 b/d).
"Longer-term projects already underway magnified the impact of the planned and unplanned outages," said the agency. "BP's Whiting, Indiana, refinery (337,000 b/d), for example, has had 260,000 b/d offline since November as coking capacity is installed to increase its ability to run heavy crude. Northern Tier's St. Paul, Minnesota, refinery (74,000 b/d) was reported to have been shut down in April to undergo a planned expansion."
PADD 2 gasoline stocks "began April near the top of the five-year range but are now at the bottom of the range, having fallen 6 million barrels since April 12. The combination of lower production from PADD 2 refineries and reduced inventories put upward pressure on prices," said EIA. 'HARD TO PREDICT'
In Canada, Michael Ervin, principal of MJ Ervin and Associates, said scarce rail car availability is making matters worse.
The higher gasoline price "is not isolated to the Edmonton region, but has also affected British Columbia, Saskatchewan and Manitoba," he said in a phone interview. "It is hard to predict how long the tightness will last.
"Earlier, any shortages would be made up by utilizing rail cars to bring in products into western Canada from other parts of the continent," Erwin said. "But now rail cars are virtually non-existent and they are moving crude out of the Western Canadian Sedimentary Basin and the Bakken to refineries in the East Coast of Canada and the US."
Suncor in its online blog said it has "successfully sourced additional gasoline through our supply network and [has] delivered product to Manitoba and Saskatchewan."
While the company added that "supply to retail sites in those provinces will no longer be affected by the fuel shortage," spokeswoman Nicole Fisher said Suncor is continuing to replenish its Petro-Canada retail stations. She did not give details on when all stations would be resupplied.
Brian Ahearn, vice president western division with the Canadian Fuels Association (CFA), said wholesale rack prices, retail margins and crude oil prices can all lead to higher gasoline retail prices.
"During this time of the year, motorists are consuming more and the demand for diesel is also rising from the farming community and industries," Ahearn said. "This is impacting the demand/supply scenario in western Canada."
Ottawa-based CFA represents the industry that supplies about 95% of Canada's transportation fuels.
Suncor's Fisher said in an email that gasoline prices are determined by a number of factors, including the price of crude oil, price of wholesale gasoline and local market forces.
"Two of these components are commodities which are set by the futures market," she said Thursday. "This market is based on supply and demand and market sentiment."
