The Canadian heavy oil differential narrowed against the West Texas Intermediate (WTI) benchmark on Tuesday to its narrowest level in more than a year and a half:
Western Canada Select (WCS) heavy blend crude for February delivery in Hardisty, Alberta, settled at $9.20 a barrel below WTI crude futures , narrower than Monday’s settle of $10.15 below WTI, according to Net Energy Exchange.
The intraday low of $9 is the lowest differential, or discount, on Canadian heavy crude to WTI since May 2017, according to Net Energy data.
The differential’s current level may be a “short-term blip,” due to strong demand from U.S. refineries, increased crude-by-rail shipments and production curtailments, a Calgary-based oil industry source said.
Light synthetic crude from the oil sands for February delivery finished on par with WTI, compared with Monday’s settle of 15 cents below.
Alberta mandated production cuts amounting to 325,000 barrels per day (bpd) starting this month in an effort to drain the Canadian province’s excess crude in storage.
The government on Dec. 30 then made amendments to its curtailment rules, factoring in exemptions for some facilities that had been increasing production and for operators with single projects, and taking into account safety considerations.
Global oil prices rose more than 2 percent on Tuesday, supported by hopes that demand may rise more quickly if talks between U.S. and Chinese officials resolve the trade dispute between the world’s two biggest economies.
Business advisory firm Deloitte forecast average WTI price of $58 per barrel and WCS price of C$50 in 2019. It expects the heavy differential to average between $18 and $20 per barrel in 2019.