Enbridge limits space in January on west Canadian oil pipelines

Enbridge Inc will ration space on its Mainline crude pipeline system in January, the company said on Tuesday, the latest sign of record storage inventories in western Canada pushing export networks to capacity.Canada’s largest pipeline company said it will apportion Lines 4 and 67, which ship heavy crude, by 36 percent and Lines 2 and 3, which carry light barrels, by 17 percent.

Apportionment means shippers cannot transport all their nominated volumes on the Enbridge system and can lead to a crude build up in Alberta, which tends to widen the discount on Canadian crude versus benchmark U.S. oil.

There is often some apportionment on the Enbridge network but January’s cuts are higher than usual.

The prospect of tighter pipeline capacity in January is a blow to Canadian producers who saw the discount on heavy barrels hit its widest level in four years this month, erasing recent gains made in U.S. benchmark crude and eating into revenues.

Western Canada Select (WCS) heavy blend crude traded as low as $26.50 a barrel under the West Texas Intermediate (WTI) benchmark because of reduced capacity on TransCanada Corp’s Keystone pipeline after a leak in South Dakota in November, and apportionment on Enbridge lines.

Many analysts expect WCS to trade around $15-$18 per barrel below WTI next year as oil sands production rises and capacity on pipelines and railroads remain at a premium.