Bakken crude price discounts widen on refinery maintenance, imports from Canada

Bakken crude price discounts to WTI have widened on increased production of Canadian sweet crude and a drop in US Midwest refinery runs, an analysis showed Nov. 21.

Platts last assessed Bakken for injection into the Dakota Access Pipeline in North Dakota's Williston Basin at a $3.70/b discount to WTI on Nov. 20, the widest discount since May 14, when it was assessed at a $3.85/b discount. The discount has widened from 80 cents/b on Oct. 11.

The Midwest is flush with light sweet crude as pipeline flows from North Dakota and Canada are steady, while refiners have cut runs. Midwest gross refinery inputs at 3.7 million b/d in the week ended Nov. 15 were up from 3.6 million b/d in the week ended Oct. 11, but down from 4.1 million b/d in the week ended Aug. 30, US Energy Information Administration data shows.

However, refinery runs are expected to pick up soon as plants exit maintenance. For instance, BP was expected to begin restarting its 435,000 b/d Whiting, Indiana, refinery on Nov. 20, according to an industry source familiar with the refinery's operations.

The refinery, the largest in the Midwest and a key supplier to the Chicago market, had been expected to be back up by Nov. 15. Work was performed on a 255,000 b/d crude distillation unit and a coker. The units went down on Sept. 23.

Bakken crude production at 1.2 million b/d in October was down from 1.3 million b/d in February and expected to remain roughly unchanged through the end of 2026, S&P Global Commodity insights data shows.

"Output growth is expected to remain relatively flat in 2024 and 2025 as sweet spot exhaustion becomes a limiting factor, capping production at just over 1.2 million b/d," Commodity Insights analysts said in a report.

But Canadian light sweet crude flows into the Midwest have risen to average 438,000 b/d in the third quarter from 388,000 b/d in Q4 2023, Commodity insights data shows. Commodity Insights analysts expect those flows to rise to 462,000 b/d in Q1 2025, and 500,000 b/d by Q4 2026.

Ample supplies

Bakken-originated crude is forced to compete with Canadian-origin light sweet grades that are arriving at Clearbrook, Minnesota, via Enbridge's Mainline system, leaving the region with an ample amount of product and weighing on prices.

In a production update released Oct. 19, North Dakota Pipeline Authority Director Justin Kringstad said the startup of the Trans Mountain pipeline expansion so far "doesn't appear to be having a positive impact on North Dakota pricing," given that TMX continues to primarily move heavy crude.

TMX came online May 1, allowing more Canadian crude to be piped to Canada's Pacific Coast for export to the US West Coast and Asia. In October, roughly 60,000 b/d of Canadian light crude was loaded for export from TMX, about 14% of total TMX exports, according to Commodity Insights analysts.

"If we continue to see congestion on the Enbridge mainline system, North Dakota barrels enter the PADD II marketplace and compete at Clearbrook with those Canadian mainline system light-sweet barrels," Kringstad said. "At this point, I'm not expecting any real reprieve unless we start seeing light-sweet barrels starting to head on TMX, but at this time I have not seen that take place."

Apportionment on the Canadian Mainline crude oil system has been reinstated for November at 2% for both light and heavy barrels, as producers continue to seek more market access, a spokesperson for operator Enbridge said Nov. 12.

Increased flows on TMX have caused crude price discounts for Canadian heavy grades to tighten. Western Canadian Select at Hardisty, Alberta, has averaged at an $11.96/b discount to WTI so far in November, in from a $25.44/b discount in November 2023, Platts data shows.