Alberta analeptic: oil erases a week’s losses and syncrude premium widens unexpectedly
Crude oil jumped to the highest level in more than a week on Monday after positive news about Japan signalled the global economy may not be in such dire straits as previously thought, the dollar slumped and fresh data showed China’s reliance on foreign oil – now at over 55% – is increasing at a rapid pace.
US crude in the form of West Texas Intermediate rose 3% to just shy of $88 per barrel and the discount to international prices narrowed slightly. The price for Canadian synthetic crude – a light oil manufactured from oil sands – topped $102 as the premium it attracts widened to over $15 despite a looming end to shortages.
West Texas Intermediate crude for September delivery surged to $87.88 per barrel on the New York Mercantile Exchange on Monday. North Sea Brent, considered the international benchmark, rose $1.88 to finish just short of $110 in London.
Reuters reports light synthetic crude for September delivery was discussed at about $15.10 a barrel over benchmark West Texas Intermediate, compared with about $14.50 a barrel over WTI last week.
Despite Monday’s rally it is expected that syncrude will return to a level where it trades at par or at a discount to WTI as shortages ease. Canadian Natural Resources announced at the beginning of August it is poised to restart its Horizon oil sands upgrading plant seven months after it went up in flames and aims to spend over $2 billion to more than double its capacity.
SeattlePI quotes one oil trader: “Last week, we saw a market that was really driven by fear. The data out of Japan shows that the world isn’t falling off the map.”
The US Energy Information Administration expects worldwide oil consumption to increase by 1.4 million b/d in 2011 led by a 6.5% jump in China. Xinhua reports China’s rising dependence on imported oil – now at over 55% and up from 33% just two years ago – is threatening the country’s energy security.