Expanded Trans Mountain pipeline capacity fails to lift Canadian heavy oil priceThe Trans Mountain oil pipeline expansion (TMX) was meant to shrink the discount on Canadian oil versus U.S. crude but three months in the differential is wider than when commercial operations on the project started.
Many analysts had forecast the differential on Western Canada Select (WCS) versus U.S. crude would gradually narrow to single digits thanks to the extra 590,000 barrels per day (bpd) of export capacity offered by TMX.
But instead WCS for delivery in Hardisty, Alberta, is trading around $15 a barrel below benchmark West Texas Intermediate (WTI) oil, versus $11.75 a barrel under the U.S. crude on May 1, the first day of commercial operations. WTI has declined in recent weeks to less than $74 a barrel.
Oil companies in Canada, the world's fourth-largest crude producer, have struggled for years with production outpacing the space available on export pipelines, causing crude to get bottlenecked in Alberta. TMX's start-up means Canada finally has spare pipeline capacity, but the expected boost to prices has not materialized.
On earnings calls last week, Cenovus Energy (CVE.TO)
, opens new tab and Canadian Natural Resources Ltd (CNQ.TO)
, opens new tab, both major shippers on TMX, blamed a number of factors.
These include increased competition on the U.S. Gulf Coast from Mexican heavy crude imports and U.S. refinery outages including ExxonMobil's 251,800-bpd Joliet, Illinois, plant that took most of its units offline after losing power following a tornado last month and has not yet fully restarted.
Even so, company executives remained optimistic that the WCS discount would start to narrow in coming months.
"Over the next little while I would say we expect Trans Mountain to continue to have its intended impact in Alberta and differentials to be as narrow as they have been in a long time," said Geoff Murray, executive vice-president of commercial at Cenovus.
"The important thing around Trans Mountain is we've seen the facility come online. It's up, it's operating and it's operating well.".........
https://www.reuters.com/business/energy/expanded-trans-mountain-pipeline-capacity-fails-lift-canadian-heavy-oil-price-2024-08-06/
