Albertan wildfires threaten 700 kbd of supply, tightening heavy crude markets

Market & Trading Calls

• Bullish on near-term WCS Hardisty crude differentials as Albertan wildfires close in on major oil sands operations and shut-in production in early June.
• Bearish on medium crude diffs as OPEC+ accelerates unwinding for a third month, adding yet another 411 kbd in July, while strong refining margins likely approach a tipping point.
• Bullish on Atlantic Basin light sweet crude differentials in the near term amid rising summer crude demand, Ekofisk field maintenance and US shale supply declines.

Trades of the month

• Aramco July OSPs: Arab Light and Arab Extra Light are likely to be cut by $0.50–$0.70/bbl m/m in Asia, reflecting weaker fundamentals and the need to stay competitive against rival barrels. We expect a smaller cut of $0.30-$0.40/bbl for Arab Heavy considering strong fuel oil cracks. Arab Light OSPs into Europe and the US are likely to rise by $1.00-1.20/bbl and $0.10-0.20/bbl, respectively, reflecting the stronger market structure for medium sours in those regions.
• Long WCS Hardisty relative to Maya as heavy crude markets along the USGC remain almost unaffected from Albertan supply disruptions.