A maintenance shutdown at the refinery that is the largest buyer of Canadian heavy oil in the United States is expected to extend and possibly worsen the price discounts on crude from north of the border.
Analysts at AltaCorp Capital in Calgary say the planned turnaround at the 430,000-barrel-per-day BP Whiting refinery in Indiana – which buys about 250,000 bpd. of heavy crude from Canada – will reduce demand over the next month and a half.
They say the shutdown adds to a heavy schedule of refinery maintenance in the U.S. Midwest, with about 829,000 bpd. of capacity expected to be unavailable through October, higher than 560,000 bpd. in the same period of 2017 and 300,000 bpd. the year before.
The difference between benchmark oil sands blend Western Canadian Select and New York-traded West Texas Intermediate has widened to five-year highs of more than US$30 per barrel in the past week, closing Tuesday at US$31.50 per barrel.
That’s more than double the typical discount, and also reflects ongoing export pipeline constraints.
In a separate report, energy analysts at Haywood Securities Inc. point out that Canadian light oil is also facing higher-than-usual discounts to WTI and that situation is also expected to be aggravated due to lower demand from U.S. Midwest refineries.