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Canada crude - Heavy grades edge away from 10-month low

Wed, 06th Nov 2013 23:15

* Dec WCS trades at $41.00/bbl below WTI

* Dec synthetic trades at $15.00/bbl below WTI

CALGARY, Alberta, Nov 6 (Reuters) - Canadian heavy crudeprices steadied on Wednesday after a recent fall to 10-monthlows, but looked likely to remain under pressure from limitedpipeline capacity and unplanned refinery outages.

Western Canada Select heavy blend for December delivery lasttraded at $41.00 per barrel below the West Texas Intermediatebenchmark, according to Shorcan Energy brokers.

That was slightly higher than Tuesday's settlement of $41.50per barrel below the benchmark, which was the widestdifferential since January.

Pipeline company Enbridge Inc rationed space onadditional pipelines in November, meaning producers are unableto ship as much crude as they would like to market and oil isgetting stranded in Alberta, driving prices lower.

Meanwhile, fires at Citgo Petroleum Corp's 174,500 barrelper day Lemont, Illinois, refinery and the 130,000 bpd Co-oprefinery in Regina, Saskatchewan, have reduced demand for crude.

Delays in starting up a new coker that would process moreheavy crude at BP PLC's 405,000 bpd Whiting, Indiana,refinery and increasing production at Imperial Oil's 110,000 bpd Kearl oil sands project also mean supply isoutweighing demand.

Suncor Energy Inc, Canada's largest energy company,said on Wednesday its average oil sands production rose 2.7percent month-on-month to 375,000 bpd.

David Bouckhout, senior commodities analyst at TD Securitiesin Calgary, said he expected the differential between WCS andWTI to narrow only modestly into the end of 2013.

"In our view, a more material narrowing will not come untilthere is evidence of heavy oil being processed at BP Whiting'snew coker, and we see the return of refining utilization fromboth planned and unplanned events," he wrote in a note.

However, the eventual removal of pressure restrictions onthe Enbridge Mainline network next year will add an extra200,000 bpd of capacity and help strengthen heavy crude prices.

Bouckhout said TD Securities expected to see WCS tradingbetween $30 and $35 per barrel below WTI in the early days of2014, narrowing further to the mid-$20s below WTI by mid-2014.

By 2015 he said the differential should return to more'normal' levels around $20 per barrel below the benchmark.

Light synthetic crude from the oil sands for Decemberdelivery last traded at $15.00 per barrel below WTI, comparedwith a settlement price of $15.25 per barrel below the benchmarkon Tuesday.

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