US, Latam crude prices rise on Keystone outage

OREANDA-NEWS. April 11, 2016. A week-long outage at TransCanada's 590,000 b/d Keystone crude pipeline from Hardisty, Alberta, to Cushing, Oklahoma, and Wood River, Illinois, spurred crude prices to rise throughout the Americas.

The shutdown, which started 1:30pm ET on 2 April after the company received a report of a leak, will continue through "at least early next week," according to TransCanada. The flow of Canadian crude supply is threatened at the US Gulf and the midcontinent, compelling US refiners to compete in alternative crude markets to replace some of the deficit.

The Mars discount to US oil benchmark West Texas Intermediate (WTI) has narrowed every trade session since 4 April, when it traded at discounts of \\$3.80/bl and \\$3.75/bl. Today May Mars at the US Gulf traded at a discount of \\$3.20/bl to WTI, up from yesterday's range between \\$3.50/bl and \\$3.25/bl under WTI.

The Keystone outage's effect on coastal fundamentals is also reflected in the spread between Light Louisiana Sweet (LLS) and Mars, which narrowed to just below \\$5/bl this morning after starting the week at about \\$5.60/bl. The spread has not been this narrow since early March.

Louisiana refiners Marathon, ExxonMobil, Phillips 66 and Valero processed more than 1.5mn bl of Canadian crude in January, according to the latest company-specific US government data. ExxonMobil's 500,000 b/d refinery in Baton Rouge, Louisiana, took 24,097 b/d of Canadian heavy crude in January.

TransCanada's Marketlink pipeline is connected to Keystone and delivers to Sunoco's terminal in Nederland, Texas. Sunoco Nederland received 62,259 b/d of Canadian crude in January, while Motiva's 600,000 b/d refinery in Port Arthur, Texas, received 80,922 b/d of Canadian crude via Sunoco Nederland.

The premium for Western Canadian Select (WCS) crude at Cushing to WCS at Hardisty climbed on 6 April to \\$5.40/bl, the highest since 24 August 2015.

Phillips 66 said its 356,000 b/d Wood River joint venture refinery in Roxana, Illinois, was running at reduced rates during the outage. Wood River took 211,548 b/d of Canadian crude below 24° API in January, the most recent month for which EIA company level import data are available.

Colombian heavy sour Castilla Blend, which directly competes with Canadian sour at the US Gulf, rose for two consecutive days to trade at a discount to international crude marker Ice Brent of \\$9.75/bl. This is the narrowest discount to Ice Brent that Castilla Blend has had since 2 February, when rumors of supply disruptions pushed the Castilla discount to only \\$9.50/bl.

Colombia's medium sour Vasconia, which competes with Mars, was supported by a narrow spread between WTI and Ice Brent, coupled with stronger US prices during the outage that made foreign crude imports appear more economic. Vasconia prices rose throughout the week by about 25?/bl to a \\$6.75/bl discount to Ice Brent yesterday, or its narrowest since 4 March.