Canadian Oil Has Record Day After Enbridge Scraps New Rules

Canadian crude surged by the most ever after Enbridge Inc said it would not implement a new procedure to stop shippers from claiming more space than they can use on a key pipeline linking Alberta’s oil sands with US refineries.

Western Canadian Select jumped as much as US$12.20 a barrel to US$13.80 below the US benchmark on the 4^th June, the narrowest spread since the 16^th May.

Canadian crudes have weakened to historically low levels in recent weeks as growing production overwhelms available pipeline capacity to transport Alberta’s supplies south of the border.

Canada’s biggest crude-export pipeline operator told shippers on the 4^th June  that it would not proceed with recently announced rules setting an allowance for the amount of crude companies could nominate for transport on its mainline. The move came after discussions with shippers, Enbridge said.

“Producers have a strong say in how the market is going to be participated in,” Tim Pickering, chief investment officer at Auspice Capital Advisors Ltd from Calgary said.

The Enbridge turnabout shows that “the pipelines can’t just do changes that aren’t fair and are not conducive” to its customers.

The National Energy Board, Canada’s pipeline regulator, did not intervene on the Enbridge matter and received no complaints, spokeswoman Chantal Macleod said.

In a notice last month, the company informed shippers that their volumes would be based on a 12-month rolling average, plus 15 percent for heavy crude and 40 percent for light crude and that the new rules applied to July shipments onward. Shippers who wished to send more than their allotted amount would have had to show physical proof of the volumes.

“Enbridge’s mainline system continues to be oversubscribed,” Enbridge said in a statement.

“We have been engaged with our customers to improve the nomination process and will continue to work directly with them on this issue.”

Source: Rigzone