Heavy Oil Discount Widens on Whiting Outage

The discount on Western Canada Select (WCS) heavy crude versus the North American benchmark West Texas Intermediate (WTI) widened on Thursday as BP shut down its Whiting, Indiana, refinery after a transformer failure caused a plant-wide power outage.

The 435,000 barrel-per-day refinery is the largest in the U.S. Midwest, and a major consumer of Canadian heavy crude. News of the shutdown sent WCS prices sharply lower on concerns about a drop in demand.

WCS for March delivery in Hardisty, Alberta, settled at $19.00 a barrel under WTI, according to brokerage CalRock, having closed at $18.10 per barrel below the U.S. benchmark on Wednesday.

“It went wild there for a minute,” said another Calgary-based broker. “Big sell-off.”

It is not yet clear how long it will take BP to restart the refinery.

The 55,000-bpd Burnaby, British Columbia, refinery owned by Parkland Corp is also offline for maintenance. Parkland had a planned turnaround scheduled to start in February but shut down operations last week after encountering issues with a processing unit.

Adding to the bearish outlook for Canadian heavy crude, the Trans Mountain pipeline expansion project said this week it encountered technical issues during its final leg of construction and faces new delays.

Global oil prices fell over 2% after unsubstantiated reports of a ceasefire between Israel and Hamas and as a result of the Whiting outage.

(Reporting by Nia Williams in British Columbia; Editing by Christopher Cushing)