Canadian oil output to take a hit

Prices rise on supply shortage, Syria attack

Canadian and U. S. oil prices surged Friday amid a shortage of synthetic crude supplies in Alberta and following the Trump administration’s attack on a Syrian government airfield.

Prices f or U. S. crude benchmark West Texas Intermediate neared the US$ 53 mark in Friday morning trading, before closing at US$ 52.24, up US54 cents. Canadian heavy crude was up 20 cents to US$ 40.99 on Friday, according to the Canadian Crude Index.

Prices for heavy oil were on the rise following a fire at the 350,000 barrels- per- day Syncrude plant on March 14 that caused majority owner Suncor Energy Inc. to temporarily shut in production. The fire has caused a steep shortage of synthetic crude supplies for Canadian heavy oil producers who depend on the lighter, upgraded crude for its operations.

ConocoPhillips reduced output at its 140,000 bpd Surmont project, a j oint venture with Total E& P Canada, by 40 per cent, two market sources told Reuters. CNOOC Ltd. subsidiary Nexen Energy, which also uses synthetic crude to dilute its bitumen, also cut output from its 40,000- bpd Long Lake oilsands project this month by 48 per cent, sources told Reuters.

Pipeline data suggests heavy oil flows into the U. S. are more or less unchanged after t he Syncrude f i re, though up- to- the- minute data is limited so soon after the incident, according to Genscape Inc. analyst Ryan Saxton.

However, reduced inventory levels at Edmonton and Hardisty in Alberta, the two main hubs for Canadian heavy crude, suggest Gulf Coast refiners could be using older stockpiles for their feedstock, Saxton said.

Canada exported an average of 3.5 million bpd to the United States during the week ended March 31, according to data from the U.S. Energy Information Administration.

During the three months ended Jan. 31, an average of 336,000 barrels of heavy oil were exported to the U.S. Gulf Coast, which is a major refining hub of Canadian heavy oil.

Suncor is currently assessing the damage of the Syncrude fire, and does not yet have a definitive timeline for when production will be ramped back up.

“We’re also conducting a very thorough investigation into the cost of what happened,” said Will Gibson, a Syncrude spokesperson.

Suncor significantly boosted its stake in the Syncrude development after completing its $ 6.6 billion acquisition of Canadian Oil Sands in January 2016. Months later the company took a majority stake in the development with a $937 million purchase of Murphy Oil Corp., bringing its stake up to 53.74 per cent. Imperial Oil Ltd. owns a 25 per cent stake in Syncrude.

Meanwhile, international and U.S. prices for crude also spiked Friday after the U. S. missile attack on a Syrian airfield. Analysts speculated that if the attack was a onetime event, Friday’s price bump was expected to be short-lived, unless it frays the relationship of major oil producers.

“While there is no real immediate supply disruption threat given that the majority of local production has long been offline due to the civil war, there remain a number of risks,” such as the end of co- operation on oil cuts between Russia and the Gulf states, said Helima Croft at RBC Capital Markets in a note to clients.

THERE REMAIN A NUMBER OF RISKS.