Canadian heavy crude extends gains at Cushing amid strong demand

Thu Oct 2, 2014 5:24pm EDT
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CALGARY, Alberta Oct 2 (Reuters) - The price of Canadian heavy crude at Cushing, Oklahoma, hit fresh highs on Thursday, lifted by demand from new pipelines and narrowing differentials in Alberta, market sources said.

Rising prices are the latest sign of surging demand for crude at the storage hub, which is the delivery point for U.S. crude oil futures. The premium for Canadian crude at the hub strengthened to around $2 to $3 a barrel since the previous month, according to one trader.

Western Canada Select heavy blend for November delivery at Cushing traded at $4.75 per barrel below WTI, having changed hands at around $5.25 per barrel below on Wednesday.

Trading sources said increased demand for crude to fill Enbridge Inc's new 600,000 barrel-per-day Flanagan South pipeline, which runs from Illinois to Cushing and is due to start up by year-end, was pushing prices higher.

Meanwhile, Enbridge is also due to start shipping crude on its reversed Line 9 pipeline to Montreal in November.

WCS for delivery in Hardisty, Alberta, is hovering near a 14-month high hit last month of $13.00 per barrel below WTI. Western Canadian Select is generally priced at Hardisty, but pressure on Cushing has added to its strength there.

Traders have reported Cushing oil stocks are already short and on Wednesday an Enbridge executive said temporary supply issues on the 193,000 bpd Spearhead pipeline between Illinois and Oklahoma had forced the company to cut runs.

Enbridge is undertaking a multibillion-dollar expansion program on its 2.5 million bpd Mainline system, which carries the bulk of Canadian crude exports to the United States, but traders have voiced concerns that bottlenecks will simply move upstream and leave crude stranded in the northern portion of the network.

Last week, limited crude supplies at Cushing, Oklahoma, prompted Enbridge to implement steps to increase the flow into Cushing. (Reporting by Nia Williams and Catherine Ngai; Editing by Jessica Resnick-Ault and James Dalgleish)