Canadian crude price plummets after partial shutdown of two critical pipelines

Canadian crude prices weakened after two critical oil pipelines, TransCanada's Keystone pipeline and Enbridge's Platte line, remained partially shut amid an investigation into a possible leak in Missouri and threatened a pile-up of crude in Alberta.

The disruption comes as refiners seek alternative supplies of heavy crude on the U.S. Gulf Coast after sanctions on Venezuela effectively cut access to the country’s oil. Canada’s oilsands crude serves as a similar substitute, but Alberta has struggled with pipeline bottlenecks that have forced rationing on export pipelines and prompted the province to impose mandatory production curtailments.

The 590,000 barrels-per-day Keystone pipeline is a critical artery taking Canadian crude from northern Alberta to U.S. refineries. Canadian pipelines are already congested, due to expanding production in recent years, forcing the Alberta provincial government to order production cuts starting last month. Enbridge's Platte crude pipeline was also shut, according to a spokesman for the Missouri Department of Natural Resources.

The Keystone line runs from Hardisty, Alberta to Cushing, Oklahoma, with a segment also connecting Steele City, Nebraska to Patoka, Illinois. The Steele City-to-Patoka segment is shut, according to TransCanada. Keystone’s Hardisty-to-Steele City and Steele City-to-Cushing, Oklahoma segments are ramping up after resuming service Wednesday night, yet flows are still not back to full capacity.

Enbridge restored service on a segment of the Platte pipeline running between Casper, Wyoming and Salisbury, Missouri, yet the remainder of the line downstream of Salisbury remains shut, according to Devin Hotzel, an Enbridge spokesman, on Thursday. The Platte pipeline transports as much as 164,000 barrels a day of crude from Casper to Guernsey and 145,000 barrels a day from Guernsey to Wood River, Illinois.

The Missouri Department of Natural Resources official said the source of the leak had not yet been identified and the quantity of oil from the release is still unknown. "The release was contained to an area of approximately 4,000 square feet... excavation of the containment area will begin soon or is already in progress," an official said in an email, adding that there are no reports of other pipelines affected or closed.

Canadian heavy oil has attracted greater demand in recent days due to U.S. sanctions against Venezuela's state oil company. Heavy Western Canadian Select for March traded at USD $10.30 below the calendar average for West Texas Intermediate crude futures, compared with a USD $9.40 discount late last week, according to data from Net Energy Exchange.