May 2, 2017 / 9:44 PM / 7 months ago

Heavy and synthetic grades slip as supply returns

CALGARY, Alberta (Reuters) - Canadian cash crude differentials weakened on Tuesday as supply concerns eased after the Syncrude oil sands project in northern Alberta resumed shipments from its Mildred Lake upgrader.

Synthetic crude from the oil sands for June delivery last traded at 90 cents per barrel above the West Texas Intermediate benchmark, according to Shorcan Energy brokers, down from Monday’s settle of $1.00 per barrel over WTI.

The discount on Western Canada Select heavy blend crude for June delivery widened to $9.30 per barrel below WTI, having settled at $9.05 per barrel under U.S. crude the previous day.

Syncrude is currently shipping 140,000 barrels per day (bpd), majority-owner Suncor said on Monday, and the 350,000-bpd plant is expected to return to full rates in June as maintenance work wraps up.

A fire in mid-March damaged the facility and forced Syncrude to cut production and bring forward planned maintenance, sending synthetic crude prices soaring as high as $6.00 a barrel over WTI as traders scrambled to secure supply.

The outage also helped narrow heavy crude differentials because some oil sands producers need synthetic crude to mix with their bitumen and create a heavy blend that can flow through pipelines.

Annual spring maintenance at other oil sands projects, including Suncor’s Firebag plant, contributed to tight heavy differentials, although market players in Calgary said the discount is likely to widen back out in coming months as supply returns to normal.

For much of the last year WCS traded in a range between $11 and $15 a barrel under benchmark U.S. crude, before tightening rapidly in April.

Reporting by Nia Williams; Editing by Jonathan Oatis

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