Since Enbridge announced it would not implement a new procedure to keep producers from claiming more space than they need on the Mainline system, Canadian crude jumped over $12/barrel.  Bloomberg photo by Matthew Staver.

Canadian crude up as much as $12.20/barrel Monday

On Monday after Enbridge announced it will not make Canadian crude producers stick to crude allocation limits on its Mainline system, Canadian crude prices jumped by $12.20/barrel.

The 1,900 mile (3,000 Km) Enbridge Mainline system carries Canadian oil sands crude to US refineries.

Calgary-based Enbridge, Canada’s largest oil export pipeline company, told producers that it will not proceed with new rules which set allowances for the amount of crude that companies could book to transport on the Mainline system.

Enbridge says the change came after discussions with shippers.

“Producers have a strong say in how the market is going to be participated in,” Tim Pickering, chief investment officer at Auspice Capital Advisors Ltd., told Bloomberg . The change in strategy shows that “the pipelines can’t just do changes that aren’t fair and are not conducive” to its customers.

The increase dropped the discount to US WTI to $13.80/barrel, the narrowest spread since May 16.

In recent weeks, the differential grew to record levels due to rising production overwhelming pipeline capacity.  According to the International Energy Agency, Canadian crude producers pumped a record 5.2 million barrels per day (b/d) in March.  Recent maintenance and rising discount to WTI have cut production since March.

Last month, Enbridge told its customers that beginning in July, their volumes would be based on a 12-month rolling average, plus an additional 15 per cent for heavy crude and 40 per cent for light crude.  Any volumes over that, the producers would have to prove they have the volumes, according to Bloomberg.

“Enbridge’s mainline system continues to be oversubscribed,” the company said in a statement. “We have been engaged with our customers to improve the nomination process and will continue to work directly with them on this issue.”