TMX Start-up Fails to Narrow Canadian Crude Discounts: Reuters

The startup of the Trans Mountain pipeline has failed to narrow Canadian Crude differentials to WTI, despite previous expectations, Reuters said.

• Analysts had forecast that WCS v WTI would narrow to single digit discounts once the additional 590k b/d of pipeline capacity came online, lifting Alberta’s supply bottleneck.
• However, WCS is currently trading around a $15/b discount to WTI, wider than the $11.75/b on May 1 – the first day of TMX’s commercial operations.
• This is also despite a recent decline in the underlying value of WTI.
• Canadian producers have blames increased competition from USGC and Mexican heavy crude imports, coupled with refinery outages at Exxon’s 251k b/d Joliet refinery, Illinois.
• China’s heavy sour demand has also been tepid, weighing on heavy grades globally.
• Consequently, anticipated demand for Canadian crudes has not materialised as forecasted.
• Nonetheless, producers are still optimistic that WCS discounts will start to narrow in the coming months