Trans Mountain pipeline outage pushes Western Canadian crude prices lower

Western Canadian crude prices tumbled further Nov. 22 even as Trans Mountain said in a statement it was making progress toward restarting the 300,000 b/d combination crude and refined products pipeline shut by flooding in British Columbia Nov. 19.

"If all planning work continues to progress and no further issues with the pipeline are assessed, Trans Mountain is optimistic we can restart the pipeline, in some capacity, by the end of the week," the company said in a Nov. 22 statement.

Prompt prices for November barrels of Western Canadian crudes continued to be priced a at steep discounts to the WTI benchmark on Nov. 22, sources said.

November barrels of Mixed Light Sweet crude in Edmonton, Alberta, was heard trading around a $13/b discount to the WTI calendar month average. It was heard offered on Nov. 19 at minus $11/b.

Mixed Light Sweet December barrels was heard talked at WTI CMA minus $7.50/b. While trading for January barrels has yet to pick up, sources said. Mixed Light Sweet's 30-day rolling average differential to WTI CMA is minus $2.87/b, according to S&P Global Platts data. Western Canadian Select in Hardisty, Alberta, for November was heard offered at WTI CMA minus $24.25/b on Nov. 19.

WCS Hardisty has averaged a discount of $16.63/b over the past 30 days.

Widespread flooding and debris flows in British Columbia shut down major rail and pipeline services into the province last week.

Washington State refiners most impacted

According to S&P Global Platts Analytics analyst Parker Fawcett, total combined flows have averaged 326,000 b/d in 1H21, of which 302,000 b/d was crude and 24,000 b/d was refined products. Roughly 90% of the crude transported is lights, of which 58,000 b/d has been used for local refining while 214,000 b/d is exported to refineries primarily in Washington.

Restart of the pipeline this week is built into the market, said Vijay Muralidharan, Director of Consulting at Calgary-based Kalibrate, noting that between five to 12 days of refined product stocks and over two weeks of crude supply are held at the terminal at the end of the pipeline.

However, an extended outage could create supply problems.

"The longer the pipeline stays down the bigger the issue," he said.

Muralidharan said that US Pacific Northwest refineries depend Trans Mountain to deliver them multiple grades of Western Canadian crude.

The five refineries in the state of Washington have total crude processing capacity of 651,700 b/d, according to Energy Information Administration data. Western Canada is a key crude supplier to the region which imported 4.47 million barrels of medium sour and 1.6 million barrels of light sweet crude in July 2021, according to EIA data.

Muralidharan said that PNW refiners like "bottomless crudes" like Syncrude, and said that an extended outage could increase volumes of Bakken railed from North Dakota into the region – another low sulfur crude with virtual no residuals.

Canadian National Railway as of Nov. 22 has not released an update to get service restored on its lines into Vancouver. However, Canadian Pacific said it could restart rail service as early as midday Nov. 23.

Parkland, owner and operator of the 55,000 b/d refinery in Burnaby, said it was operating normally as it kept an eye on Trans Mountain's restart schedule.

"We are monitoring the temporary shutdown of the Trans Mountain Pipeline closely. Our teams continue to safely operate the Burnaby refinery and are working to import available fuel directly into the refinery," said Simon Scott, Director, Corporate Communications, for Parkland.

Scott said the refinery, located on the Burrard inlet, has a "dedicated marine terminal where ships can deliver refined products, which can then be stored and distributed across the lower mainland and Vancouver Island."