On top of a 3.3% decline in US crude oil prices on Wednesday comes news from Reuters that a US State Department official said the year-end target to approve the Keystone XL oil sands pipeline could well be missed. It would be the second time a decision has been pushed out.
A surge in inventories at the Cushing hub in the Midwest, the pricing point for US crude was behind the fall and a further delay to Keystone, designed to carry Canadian crude to Texas refineries and relieve the Cushing glut, will hit oil sands producers particularly hard. Canada's heavy oil already sells at almost a $30 discount to the international price.
Canadian heavy oil – exported only to the US due to a paucity of pipelines – sold for $9.90 less than US crude on Wednesday which in turn traded at a discount of almost $20 to the international North Sea Brent benchmark, meaning oil sands producers now sell some of the cheapest fuel on the planet.
The Financial Post quotes the US official, who spoke on condition of anonymity: “While we still hope to make a decision by the end of the year, we are first and foremost committed to a thorough, transparent and rigorous review process.”