Canadian heavy crude’s discount widened versus the U.S. benchmark West Texas Intermediate (WTI) oil on Tuesday, as Alberta producers braced for deeper output cuts and doubts grew that OPEC and its allies would agree on a global pact to reduce a supply glut.
Western Canada Select (WCS) heavy blend crude for May delivery in Hardisty, Alberta, traded at $19.75 per barrel below WTI, according to NE2 Canada Inc, wider than Friday’s settle of $18 under.
“We think the demand and refinery cuts will really materialize over the next couple weeks and we expect to see pressure on inventories come up and with that producers will have to turn down more,” said IHS Markit analyst Kevin Birn.
Global oil prices edged lower on Tuesday as doubts grew that the world’s biggest producers will agree to cut output to reduce a glut of crude.
Wider differentials are needed to incentivize additional production cuts or storage limits will inevitably force a supply correction, analysts at Tudor, Pickering, Holt & Co said.
About 20-25% of Western Canada’s crude oil production could be shut in during the current second quarter, Enbridge Inc Chief Executive Al Monaco said on Tuesday.