Page 5 - NorthAmOil Week 41 2022
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NorthAmOil COMMENTARY NorthAmOil
The outage at BP’s
Whiting refinery has
been detrimental to
demand for WCS.
Instead, planned and unplanned outages at Commodity Context’s founder, Rory Johnston,
refineries that can process Canadian crude are as saying the weakness in demand for Canadian
being seen as a significant contributor to the crude was extending all the way to the US Gulf
trajectory of prices for the country’s heavy oil, Coast. And other factors playing into the widen-
with fewer buyers available for WCS. This time ing differential include high natural gas prices,
of year is typically when refineries go offline for which make it more costly to refine heavy and
maintenance, but the shortage of available pro- high-sulphur crude.
cessing capacity is currently being exacerbated On top of this, concerns over a looming reces-
by unplanned shutdowns. sion are also weighing on demand. And when
The latter include the 160,000 barrel per demand falls, the differential widens, according
day (bpd) Toledo, Ohio refinery co-owned to Muralidharan.
by BP and Cenovus Energy, which has been
offline since August following a fire. BP also What next?
recently restarted the 430,000 bpd Whiting, WTI prices have dropped back somewhat from
Indiana refinery, which also went offline as recent highs but were still trading at around $87
a result of a fire, but has yet to ramp it up to per barrel in mid-October. At the same time, Current trends
full capacity. WCS prices sank to around $53 per barrel, rep-
A lot of Canadian heavy crude normally goes resenting a discount of around $34 per barrel. add to the
to the Whiting refinery, R Cube Economic Con- While refining capacity that can handle Cana- headwinds faced
sulting’s director, Vijay Muralidharan, was cited dian heavy crude will come back online, provid-
by CBC News as saying. When that refinery is ing a boost to WCS demand and prices in the by Canada’s oil
offline or not running at full capacity, the crude short term, current trends add to the headwinds
it would normally receive has to travel further faced by Canada’s oil sands producers recently. sands producers
to be processed. In the longer term, questions remain over the
The situation is being further complicated future of oil production from the region in the recently.
by abnormally low water levels on the Missis- face of the accelerating energy transition and
sippi River, according to CBC. Some WCS vol- uncertainty over the potential to develop new
umes normally travel by river, but the low water projects in line with ever more stringent emis-
levels are leading to concerns about shipping sions requirements.
bottlenecks. And even in the short term, despite the
“The low level of the Mississippi does seem eventual return of refining capacity capable of
to be weighing on WCS prices, given the sup- processing Canadian heavy crude, it appears
ply dislocations it is causing,” a Kpler oil analyst, that there are enough complicating factors that
Matt Smith, told CBC. “Refineries are seemingly make narrowing the differential between WCS
having to dial back on activity because they are and WTI a challenge. A possible recession and
unable to move products.” the resulting hit to demand is among the more
The news service also cited newsletter worrying of the factors at play.
Week 41 13•October•2022 www. NEWSBASE .com P5
