Canadian sweet crudes rebound on gasoline demand
Weak demand for jet fuel preventing full recovery
New York — Typical differentials for light sweet Canadian crudes compared to their heavy counterparts are recovering as drivers return to the road.
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Register NowCanadian condensate, Mixed Sweet and Syncrude Sweet Premium have resumed trading at wider differentials to heavy blends such as Western Canadian Select after many states eased stay-at-home restrictions. Still, the differentials for Canadian sweets are far below levels seen at the beginning of the year as demand for jet fuel remains muted, sources said.
Canadian C5 condensate, which is used for a diluent in pipelines as well as stock for transportation fuels, was assessed Aug. 7 at a $9.25/b premium to Western Canadian Select at Hardisty, Alberta, S&P Global Platts data show, up from a discount of $2.80/b on Apr. 21. Also on Aug. 7, Syncrude Sweet Premium was at a premium of $9.40/b to WCS after dipping to a discount of 25 cents/b on April 21, according to Platts data.
The increased differential come as data show a surge in demand from US refiners, particularly in the US Midwest, a region that typically takes more sweet crude than the US Gulf Coast. US Midwest crude imports in the week ended July 31 were the strongest since the week ended March 13 at 2.91 million b/d, according to the US Energy Information Administration. That compares with total US imports of Canadian crude of 3.79 million b/d that week, a surge of 496,000 b/d and a return to pre-pandemic levels.
Weekly US product supplied gasoline, a proxy for demand, fell to 8.62 million b/d in the week ended July 31, down from 8.81 million b/d in the previous week, though still above this year's weekly low of 5.07 million b/d in the week ended Apr. 3, according to the EIA.
A recovery was also seen in the Midwest's gasoline differential. Chicago RBOB's premium to NYMEX RBOB increased to 8.50 cents/gal August 7, compared to parity Apr. 27.
US jet fuel demand, on the other hand, faltered in the week ended July 31, with product supplied hitting a four-week low, data from the Energy Information Administration showed Aug. 4.
Just 1.01 million b/d of jet fuel were supplied throughout the week, marking the lowest level since the week ended July 3, when 924,000 b/d were supplied. The dip came after three weeks of falling demand amid a second wave of the coronavirus outbreak.
To be sure, the premiums for Canadian sweets are still far below where they started the year. Canadian condensate was assessed at a premium of $21.90/b over WCS January 2, and SSP was assessed at a $20.35/b premium.
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ANALYSIS: Canadian sweet crude differentials over heavy grades recover as driving increases - S&P Global
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