Friday, October 16, 2009

TransCanada Keystone linefill to begin in November

CALGARY, Alta. - TransCanada's Keystone pipeline will take nine million barrels of oil to fill. The linefill will take that oil off the market, and could create a short-term squeeze that boosts heavy oil prices
It will take about three months to fill the Keystone line with oil, long before any of it is refined into finished products.
That process could add enough demand to briefly strengthen prices for heavy oil, the thicker crude produced in and around the Alberta oil sands by companies like Canadian Natural Resources Ltd., Baytex Energy Trust, Nexen Inc., Husky Energy Inc. and Imperial Oil Ltd.
The pipeline, the largest to enter North American service in years, will take about six per cent of Canada's heavy oil production in that time.
“The removal of that much heavy oil in one shot” means that “heavy oil differentials will likely tighten,” said Jared Layton, a crude oil specialist with Phoenix Energy Marketing Consultants Inc.
Heavy oil is a thicker form of crude that must undergo more refining steps than light oil before it can be separated into end products like gasoline and jet fuel. As a result, it generally sells at a discount known as the “light-heavy differential.”
The light-heavy differential has dropped from an average of 22 per cent last year to as low as 10 per cent this year.

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