Syncrude is the light, sweet crude oil benchmark in Western Canada. Since August, the product has been very strong and now trades at a $14+ premium to WTI crude oil when normally the discount hovers around $2. That’s huge – so why the strong demand? Energy Sector Head Kevin Kaiser explains:
“Strength is attributed to a slew of maintenance going on at Alberta’s heavy oil upgraders, which upgrade bitumen into a light crude (there’s a lower supply of Syncrude hitting the market right now). Nexen/CNOOC’s Long Lake upgrader and Suncor’s Fort Mac upgrader are down for planned maintenance, and reports are that there are some operational issues at COS’s Syncrude facility that will reduce output there as well. The plants should return to normal operations in 4Q12, so we don’t expect the Syncrude premium to hold for long.”
Problems at plants, lower supply; these things mean syncrude is at a premium at the moment. When all fades back to normal, expect that $14 premium to WTI to lower significantly.