Canadian heavy crude benchmark Western Canadian Select at Hardisty fell
sharply Friday after TransCanada shut its 600,000 b/d Keystone pipeline
Thursday following a leak.

Sources said WCS traded Friday at the January NYMEX light sweet
crude futures contract calendar month average (WTI CMA) minus $15.90/b and at
minus $16/b. Those levels represent a drop of as much as 50 cents/b from where
the grade traded against the January WTI CMA on Thursday, which was the last
day of December crude as the prompt month prior to pipeline nominations being
due, sources said.

“It is definitely related,” one source said when asked if the Keystone
shutdown had led to the price drop.

On Thursday, TransCanada said it had shut the pipeline after detecting a
leak of about 5,000 barrels of crude in South Dakota following a drop in
pipeline pressure. The leak occurred in a section of the pipeline about 35
miles south of the Ludden pump station in Marshall County, South Dakota.

“The section … was completely isolated and within 15 minutes emergency
response procedures were activated,” the company said in a statement.

“We have been keeping our shippers and customers up to date and have
communicated that the pipeline from Hardisty, Alberta, to Cushing,
Oklahoma, and to Wood River/Patoka, Illinois, is expected to remain shut
as we respond to this information,” it said, adding the shutdown does not
impact crude flows on the Marketlink pipeline system.

TransCanada did not respond to inquiries Thursday and Friday on when the
pipeline will be restarted.

The concern is “just that Hardisty will fill up,” a second trading source
said Friday. “It’s not gonna be shut forever.”

The company said during its November 9 third-quarter 2017 earnings call
that throughput on the 1,179-mile Keystone pipeline was near capacity of
600,000 b/d, while Marketlink crude flows were 500,000 b/d, with that figure
set to rise this quarter due to a widening of the Brent-WTI spread.

The Marletlink pipeline ships crude from Cushing to refineries on the US
Gulf Coast, with the delivery points being Houston, Port Arthur and Sour Lake.

–Pat Harrington, patrick.harrington@spglobal.com

–Ashok Dutta, ashok.dutta@spglobal.com

–Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com

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