Brisk demand from refineries along with stronger prices propelled shares of big oil-sands companies Thursday as production cutbacks were seen easing congestion on major export pipelines.
Investors piled into some of the sector’s largest producers as prices for heavy oil-sands crude strengthened, buoyed by output reductions that analysts say have helped relieve constraints on major pipelines that carry crude to the United States.
Big gainers included producers MEG Energy Corp. (6 per cent), Suncor Energy Inc. (4.7 percent), Cenovus Energy Inc. (4.1 per cent) and Canadian Natural Resources Ltd. (4.1 per cent).
Constraints on key export pipelines have plagued the Alberta-based industry for much of this year, heaping pressure on prices for Western Canadian select, a blend of conventional heavy oil and bitumen from the oil sands.
Cenovus Energy, Canadian Natural and others have curtailed production to cope, reducing bloated storage levels and freeing up space on pipelines ahead of the high-demand summer months, when heavy oil is used to make asphalt.
Further supporting prices is an uptick in shipments by rail and stronger demand from U.S. refineries, which are restarting processing units after finishing seasonal maintenance.
WCS barrels for future delivery changed hands for about US$17.40 under West Texas intermediate oil Thursday, broker Net Energy Inc. said. That compares to a discount of around US$30 at times this year.
The heavy oil trades at a discount to the North American benchmark because of higher extraction costs and because it takes more energy to process and must be shipped over long distances to refineries.
The Alberta-based industry argues it needs more pipelines to fetch better prices. However, several proposed expansions are in limbo, including Enbridge Inc.’s Line 3 proejct to the U.S. Midwest and Kinder Morgan Inc.’s Trans Mountain pipeline to Canada’s West Coast.
Meanwhile, global oil prices rose on Thursday, helped by gains in U.S. equities markets and Saudi Arabia’s unexpected hike in crude prices, though crude’s advance was curbed by strength in the dollar.
Brent crude futures gained 31 cents to settle at $68.33 a barrel, and U.S. West Texas Intermediate crude rose 17 cents to settle at $63.54 a barrel.