Western Canadian crude production is declining due to heavy rain and a power outage at Cenovus Energy's (CVE) oil sand facilities, potentially tightening supplies to the US, Reuters reported Thursday, citing sources and analysts.
The pace of oil sands production has reportedly slowed due to wet weather in northern Alberta.
In Cenovus Energy's Foster Creek and Christina Lake oil sand assets, a power outage last week prompted the company to declare force majeure, sources told Reuters.
Meanwhile, Energy Aspects said the power outage has affected 10% of the company's oil sands production, the news agency said.
Cenovus did not immediately respond to' request for comment.
Western Canadian crude inventories have dropped to their lowest level since 2020, Wood Mackenzie analyst Lee Williams reportedly said, with stocks decreasing by nearly 8 million barrels since the end of February. More than half of this reduction occurred over the past two weeks alone.
Declining Canadian crude output could decrease flows to storage tanks at Cushing, Oklahoma, and to refineries in the US Midwest and Gulf Coast, the news agency said. Midwest refiners typically process oil sands crude and heavily rely on Canadian oil, having no access to waterborne crude.
US crude inventories, including strategic petroleum reserves, have dropped to 775.7 mmbbls in the week ended June 5, from 854.7 mmbbls in late February before the US-Iran war began, data from the Energy Information Administration showed.
In Cushing, data showed crude stocks recently fell to 21.6 mmbbls from 26.5 mmbbls in late February. Inventories could drop to their operational minimum, according to sources cited by Reuters.
In Asia, some buyers have turned to Canada for alternative supplies following the closure of the Strait of Hormuz.
Canada's Trans Mountain pipeline, which transports oil to the Pacific coast for export, is reportedly running at full capacity for the first time since the completion of a major expansion two years ago.
Amid tightening supply and demand balance, Canadian heavy crude prices have recently surged, with Western Canada Select's discount to North American benchmark West Texas Intermediate narrowing by about $4 per barrel since the end of May, according to the news agency.
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