Alberta wildfires take toll on oil output

Heavy crude differentials hit multi-year high

• Canadian heavy crude differentials tightened to the narrowest level in more than five years on Monday as wildfires continued to burn in northern Alberta, shutting in around 10 per cent of total oilsands production.

Western Canada Select heavy blend for July delivery last traded at US$7.10 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers.

That compares with a settlement price of US$7.95 per barrel below the benchmark on Friday.

Roughly 233,000 barrels per day of oilsands crude has been off-line for more than a week as a result of the Alberta wildfires, with no indication of when that lost production will resume.

Planned maintenance at MEG Energy’s Christina Lake project and Devon Energy’s Jackfish 1 project will further cut into supply this month.

In a note to clients, Barclays analysts said they expected total Canadian crude oil output, including conventional and synthetic crude production, to have slumped in May, down from 4.6 million bpd in January.

“We expect Canadian crude production in May to be the lowest in nearly two years as a perfect storm of events curtails output. Upgrader maintenance and wildfires in Alberta are expected to bring output temporarily below 4 million bpd,” Barclays analysts wrote.

Light synthetic crude from the oilsands for July delivery edged slightly lower to US$3.40 per barrel above WTI, down from US$3.50 per barrel above the benchmark on Friday, as traders anticipated an end to recent supply outages.

Planned second-quarter maintenance on a number of oilsands upgraders including Royal Dutch Shell’s Scotford, Alberta, facility and Coker 8-3 at the Syncrude oilsands project has either finished or is in the process of finishing. Canadian Oilsands Ltd said the project averaged 138,700 bpd in May as a result of maintenance, well below the year-to-date average of 232,000 bpd.