The discount for heavy crude Western Canada Select (WCS) to North American benchmark West Texas Intermediate (WTI) widened on Thursday as BP shut its refinery in Whiting, Indiana, after a transformer failure led to a plant-wide blackout.
The 435,000-barrel-per-day refinery is the largest in the U.S. Midwest and a major consumer of Canadian heavy oil. News of the closure caused WCS prices to drop significantly due to concerns about a drop in demand.
WCS for March delivery in Hardisty, Alberta, was $19.00 a barrel below WTI, after closing at $18.10 a barrel below the U.S. benchmark on Wednesday, according to brokerage CalRock.
“Things got wild for a minute,” said another Calgary-based broker. “Big sale.”
It is not yet clear how long it will take BP to restart the refinery.
The 55,000 bpd refinery in Burnaby, British Columbia, owned by Parkland Corp. is also out of service due to maintenance work. Parkland was scheduled for remediation to begin in February, but operations were halted last week after problems arose with a processing unit.
Adding to the pessimistic outlook for Canadian heavy oil, the Trans Mountain pipeline expansion project said this week that it had encountered technical problems during the final phase of construction and was facing new delays.
Global oil prices fell over 2% following unsubstantiated reports of a ceasefire between Israel and Hamas and as a result of the Whiting failure.
(Reporting by Nia Williams in British Columbia; Editing by Christopher Cushing)
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