Regional prices for crude oil pumped in western Canada and North Dakota rose this week to reduce their rebates against the U.S. benchmark, WTI crude, after freezing winter temperatures upset prices. Crude flows from the oil sands in Alberta and the Bakken shale deposit in the United States.
While freezing winters are not uncommon in these parts of North America, temperatures this week have fallen well below normal, disrupting flows on the Keystone pipeline from Canada to the United States which carries nearly 600,000 barrels per day (bpd) of crude oil from the Alberta tar sands to the US Midwest.
Frigid conditions and stormy and snowy weather took over North Dakota this week, as an Alberta mower brought gusts of snow and wind, and actual temperatures around Grand Forks, North Dakota, plunged to minus 30 degrees Fahrenheit (minus 34 degrees Celsius ). Winter weather advisories have been issued from Montana to North Dakota, Illinois and Michigan.
Colder than normal winter temperatures in major oil-producing centers such as Alberta and North Dakota have resulted in disrupted oil flows, pushing regional prices up and contributing to global supply disruptions ( and fears of such), which pushed the benchmark US oil price to above $ 80 a barrel by the end of this week. This was the highest prompt price at which gross WTI has been trading since mid-November, before Omicron fears triggered massive sales in late November and early December.
The freeze forced TC Energy to close the Keystone pipeline for several hours for unscheduled maintenance work as temperatures in the Hardisty Terminal area in Alberta were expected to drop to minus 35 degrees Celsius. Emergency maintenance on Keystone began Tuesday evening. The pipeline resumption of operations Wednesday evening, TC Energy said, noting that its operations on the US Gulf of Mexico coast had remained uninterrupted.
Temperatures from Alberta to North Dakota were in territory deeply below zero, and besides the Keystone pipeline, oil wells were also starting to be affected.
The price of crudes produced in North Dakota and Alberta has started to reflect expectations of tight supply going forward.
According to Bloomberg estimates, the delivery of Western Canadian Select (WCS)—The benchmark price of Canadian tar sands oil delivered to Hardisty, Alberta — relative to WTI crude fell $ 3 a barrel since late December to $ 12.10 a barrel this week.
Related: Oil Breaks $ 80 After OPEC + Sticks To Plan To Easier Cuts
The price of Bakken shale crude in North Dakota at the Clearbrook, Minnesota hub rose $ 0.90 per barrel and traded at a premium of $ 1.25 per barrel to futures contracts on WTI crude, the highest premium in two months. This week, Bakken crude traded in Wyoming at prices above WTI crude prices for the first time since mid-November due to disruption caused by the deep frost.
Operators in North Dakota and Alberta are much better prepared for freezing winter conditions than those in Texas in February of last year, so the supply effects were far from the magnitude seen in the most America’s great oil-producing state.
Yet the disruption of oil flows in the tar sands and the Bakken has added to global supply disruptions with Libyan production. down 30 percent these days compared to November, and concerns about the supply of Kazakhstan, a member of the OPEC + group, a producer of around 1.6 million barrels per day, where violent and murderous protests erupted this week. U.S. supermajor Chevron, the operator of Kazakhstan’s largest oil field Tengiz, said Thursday that the field’s crude oil production Has been reduced because some logistics contactors disrupted train lines in support of the demonstrations.
Due to all these supply issues in North America, Kazakhstan and Libya, as well as estimates OPEC once again underestimated By far its production target under the OPEC + deal, the price of WTI crude exceeded $ 80 a barrel this week for the first time since mid-November.
By Tsvetana Paraskova for OilUSD
More reads on Oil Octobers: