Enbridge Inc. is cutting supply on its key Canada line, adding yet another headwind for oil producers. As the world’s largest oil export pipeline system operator, this move will have a significant impact on the market.
Enbridge will allocate space on a segment of its Mainline system more efficiently than it has since November of last year, the company said in a statement on Friday. Allocating space more efficiently helps to prevent a glut of supply, as producers are less likely to be left with excess product.
Pipeline apportionment has previously led to large discounts for Canada's crude oil, and now threatens to further weaken oil prices. The discount for Canadian heavy crude is currently almost $30 in Alberta, close to the widest it has been since 2018. This is due to releases of high-sulfur oil from US strategic petroleum reserves, and high natural gas prices making Canadian oil expensive to refine.
Apportionment is on the rise, which could indicate that export lines are starting to fill up again. This is likely due to the record oil production in the province and the increasing demand for Canadian crude on the US Gulf Coast.
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