Syncrude outage narrows Canadian light and heavy crude differentials
According to several traders, production has Syncrude has been reduced to zero for the month of April. Majority-owner Suncor Energy had previously said pipeline shipments should reach up to 50% capacity sometime during the month April. Syncrude's Mildred Lake upgrader normally produces 350,000 bbl/day of light synthetic crude.
The light oil shortfall is also affecting ConocoPhillips' Surmont facility. Heavy oil production from the SAGD plant is blended with upgraded bitumen (light synthetic crude) to meet pipeline specifications. Reuters is reporting that production has been cut by 40% at the facility, which has a nameplate capacity of 150,000 bbl/day of heavy oil. Nexen Energy is also reporting production cuts at its Long Lake SAGD operation, which normally produces about 40,000 bbl/day of heavy oil.
The crude shortage has sent differentials for both Canadian Light and Western Canadian Select to multi-year lows. Canadian Light, which normally trades at a US$3/bbl discount, is now trading at just US$0.70 below WTI. The Heavy Oil Discount has narrowed to less than US$10/bbl, versus a pre-fire differential of almost US$15. Condensate prices in Edmonton, which normally trades on par with WTI, is now a few dollars higher.
ConocoPhillips says it is currently working with suppliers to finalize timelines and shipment volumes as Syncrude completes its maintenance turnaround and repairs. The upgrader is not expected to return to normal operation until late-May or early June.
The outages are ill-timed for US refineries that are just emerging from their spring turnarounds and gearing up for the summer driving season.