* June WCS trades at $12.70/bbl below WTI * June synthetic trades at $1.00/bbl above WTI (Updates prices, adds details on oil sands projects, pipelinecuts, adds NEW YORK to dateline) By Nia Williams and Catherine Ngai CALGARY, Alberta/NEW YORK, May 4 (Reuters) - Canadian heavycrude differentials hit their strongest level in two months onWednesday as a wildfire raging in Fort McMurray in the heart ofAlberta's oil sands region forced some projects to cut outputand pipelines to shut down. The city's population of around 88,000 was ordered to leaveimmediately on Tuesday evening as the fire breached city limitsand ripped through some neighborhoods. By Wednesday afternoon, city officials said the blaze couldgrow even worse and a slew of oil sands operators includingSuncor Energy Inc, Syncrude and Shell Canada said they were reducing production. Although the blaze is not directly threatening anyfacilities in the vast oil sands, which hold the world'sthird-largest crude reserves after Saudi Arabia and Venezuela,it disrupted some operations. Producers cut production to allow workers to evacuatesafely, and Inter Pipeline Ltd partially suspended onediluent pipeline and shut down its Corridor pipeline system,which serves Shell's operations. A domino effect quickly emerged, as Husky Energy was forced to reduce production at its oil sands project becauseof the Inter Pipeline diluent shutdown, suggesting more projectsmay be forced to follow suit. The full impact of cuts on oil sands production, whichtotals about 2.2 million barrels per day, was not immediatelyclear but Husky said it had reduced output by 20,000 barrels perday and Shell's production capacity is 255,000 bpd. "If it (the production cuts from the fire) starts dragginginto a week or so, the impact will become more acute," saidFirstEnergy Capital analyst Martin King. Other companies operating nearby include Canadian NaturalResources Ltd and CNOOC Ltd subsidiary NexenEnergy, which said their operations were not affected. The reduced oil sands production helped prop up benchmarkCanadian cash grades, as well as place a support under globalprices, though analysts and traders said the boost would likelybe short-lived. "My feeling is that this has minimal impact on productionlonger-term," said Tim Pickering, founder and chief investmentofficer at Auspice Capital Advisors in Calgary. "When we thinkabout taking production offline, there's still a significantamount of oil in storage. That's a big cushion." Western Canada Select heavy blend crude for June delivery last traded at $12.70 a barrel under the West TexasIntermediate benchmark, the narrowest discount since the startof March, according to Shorcan Energy brokers. It settled on Tuesday at $13.35 per barrel under WTI. Light synthetic crude from the oil sands for June delivery last traded at $1.00 a barrel above U.S. crudefutures, the strongest since the start of April, comparedwith a 5-cent discount the previous day. (Editing by Alan Crosby and Matthew Lewis)
Shell announces $4bn share buyback as Q3 profits beat expectations
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