Canadian oil producers were maintaining a cautious approach, holding spending at reduced levels even as rising prices brightened the outlook.
Western Canada Select (WCS) heavy blend crude for August delivery in Hardisty, Alberta, traded at $7.30 per barrel below WTI, according to NE2 Canada Inc, narrower than Monday’s settle of $7.70 under.
The differential touched the narrowest intraday level since June 2.
Differentials are tighter than conditions warrant, a Calgary industry source said, and pointed to forward strip prices that show widening of the WCS-WTI differential through 2020.
Light synthetic crude from the oil sands for August delivery traded at $2.20 under WTI, after Monday’s settlement of $2.55 under.
Tight differentials suggest western Canadian barrels remain out of the market after shut-ins in spring, Tudor Pickering Holt & Co said in a note.
The pending closure of the Dakota Access Pipeline, the largest pipeline from the North Dakota shale oil fields, is unlikely to adversely affect Hardisty, Alberta prices, Eight Capital analyst Phil Skolnick said.
Tudor Pickering Holt & Co said if Bakken prices weaken as a result of the Dakota Access closure, Canadian light crude would also come under pressure.
Global oil prices edged higher as the U.S. government forecast higher fuel demand and lower production.