Canada, Bakken light oil jump as supply cut meets demand surge

CALGARY (Bloomberg) – Prices for light crude surged in Canada and the northern U.S. after an oil-sands upgrader shut for maintenance because of a fire and reduced supply caused by preparations to place the Dakota Access pipeline into service.

Futures for the light “synthetic crude” produced from oil sands operations in Canada, jumped $1.45 to $4.70/bbl Monday compared to the WTI benchmark. The increase was the highest in more than a year, data compiled by Bloomberg show. Bakken crude at Clearbrook, Minnesota, rose to a $0.25 premium to futures, the first since last June, from a $0.30 discount on Friday.

Supply of light synthetic crude into the U.S. Midwest from Alberta was curtailed at the same time demand for light oil was increasing to fill the 1,172-mile Dakota Access pipeline. Suncor Energy said flows out of the Syncrude upgrader, which can process 350,000 bpd of oil-sands bitumen into lighter oil, will resume at 50% capacity in April. Suncor pushed up work by a month after a March 14 fire. Once at full capacity, Dakota Access will be able to ship 570,000 bpd from North Dakota to Patoka, Illinois.

“That’s going to be a big reduction” of supply, Genscape analyst Carl Evans said Monday. He said that up to 130,000 bpd of synthetic output is offline because of the Syncrude shutdown.

Syncrude’s shutdown coincides with maintenance at Suncor’s own upgrader, reducing supplies by 30,000 bpd in the second quarter.

Both synthetic and Bakken crude, are light grades that normally trade at a discount to WTI futures because they are produced in isolated locations and must be transported to refineries in the U.S. or along the gulf coast.

Canada’s Edmonton mixed sweet crude also strengthened, with the discount to WTI shrinking $0.70 to $1.65/bbl, data compiled by Bloomberg show. The absolute price of synthetic, Bakken and Edmonton mixed sweet rose even as WTI futures fell $0.24 to $47.73/bbl Monday.