Heavy discount hits narrowest level since mid-July

Canadian heavy crude’s discount versus West Texas Intermediate (WTI) narrowed on Thursday the most since mid-July, with production halted from a major oil sands site due to a pipeline leak.Western Canada Select (WCS) heavy blend crude for October delivery in Hardisty, Alberta, traded at $8.95 per barrel below WTI, according to NE2 Canada Inc. It settled the previous day at $9.35 under.

The differential moved as narrow as $7.50.

An outage on part of the Polaris diluent pipeline is the main factor narrowing the heavy differential and clarity on restart will likely widen it out, a Calgary-based trader said.

Imperial Oil Ltd said it had shut all production at its 220,000-barrel-per-day (bpd) Kearl oil sands site in Canada due to an outage of part of the Polaris pipeline in Alberta following a spill.

A fire at Suncor Energy’s base plant last month also affected its production, further limiting Alberta supplies, the trader said.

Canadian oil sands companies have been restoring production that had been shut in after the coronavirus pandemic spread and curbed demand from refineries.

Peters & Co forecast oil supplies will rise to pipeline capacity in the next few months, increasing reliance on rail, and causing differentials to widen into the fall.

Light synthetic oil from the oil sands for October delivery traded at $2.30 below WTI, narrower than the previous day’s settle of $2.70.

Global oil prices settled lower as U.S. unemployment data fed fears of a slow recovery for the economy and fuel demand a day after weak U.S. gasoline demand data.

Canadian crude oil exports to the United States rose 440,000 barrels per day (bpd) in July to 3.43 million bpd – Statistics Canada.