Canada crude -Heavy grades pull back after recent rally

Mon Dec 2, 2013 6:13pm EST
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CALGARY, Alberta Dec 2 (Reuters) - Canadian heavy crude prices weakened slightly on Monday, the first day of the December trade cycle, as some market players decided recent gains had gone too far.

Western Canada Select heavy blend for January delivery last traded at $31.25 per barrel below the West Texas Intermediate benchmark, according to Shorcan Energy brokers.

That compares with a settlement price of $30.00 per barrel below WTI on Friday.

The discount on heavy crude has narrowed more than $10 per barrel since hitting $41.50 per barrel on Nov. 5, which was the widest differential January.

News that BP Plc started up the new coker at its Whiting, Indiana, refinery and the end of seasonal refinery maintenance in Canada and the United States fanned expectations of higher demand and helped prices rally for much of November.

Traders and analysts in Calgary said the market was now consolidating after those strong gains.

"There has been a bit of a pullback in differentials and that's attributed to a little bit of an excessive reaction to some of the recent bullish news, for example Whiting starting up," said David Bouckhout, senior commodities strategist at TD Securities.

"Whiting is supportive for the market, but the market may be over exaggerated that just a little bit."

The refinery has undergone a $4 billion revamp to boost its intake of cheaper heavy Canadian crude to 350,000 barrel per day. However, congestion on export pipelines from Canada to the United States means oil sands crude might still struggle to get there, one Calgary trader said.

Light synthetic crude from the oil sands last traded at $10 per barrel below the WTI benchmark, compared with a settlement price on $9.25 per barrel below WTI on Friday.