Canadian demand for light oil surges as refiners avoid dependence on gas

Through Devika Krishna Kumar and Robert Tuttle to 24/10/2021

CALGARY (Bloomberg) – Canada’s tar sands are known to produce some of the heaviest and most carbon-intensive oils in the world, but it is the light crude produced by the country that is in most demand right now.

Refiners on the US Gulf Coast, Midwestern and Eastern Canada are looking for less dense, less sulphurous oil to avoid processing it in a unit requiring expensive natural gas. Soaring natural gas prices have added as much as $ 6 a barrel to the cost of processing more sour crudes, a ten-fold increase from two years ago, according to the International Energy Agency.

In November, Canadian pipeline operator Enbridge Inc. had to ration light oil shipments on its export pipelines for the first time in months, even after the start of a new pipeline opened up new capacity. The surge in demand weakened the price of Canadian heavy crude to a discount of more than $ 15 a barrel from the lightweight benchmark West Texas Intermediate, the largest since January, according to data from NE2 Group. The country’s Edmonton Sweet light oil sold for its smallest discount in almost a year earlier in October.

Globally, demand for light crude is increasing, leading to lower inventories at major hubs including Cushing, Oklahoma, where inventories have fallen to their lowest level in three years. Nearby American light crude grades, such as Bakken in Clearbrook, Minnesota, also remained strong due to increased demand, traders said.

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Felix J. Dixon