Canadian heavy crude’s discount versus West Texas Intermediate (WTI) narrowed on Thursday, extending a recent price trend, as demand for heavy oil grew faster than supplies.
Western Canada Select (WCS) heavy blend crude for September delivery in Hardisty, Alberta, traded at $9.90 per barrel below WTI, according to NE2 Canada Inc. It settled the previous day at $10.35 under.
The narrowing differential reflects improving Midwest refining margins and competitive bids from those refiners for heavy crude, said Iqbal Gill, head of hydrocarbon supply for BarrelTex. He added that increased exports in June drained Alberta crude inventories by 3 million barrels.
Canadian producers have been gradually restoring production that they shut during the spring.
Venezuela, a rival supplier to Canada of heavy oil, could soon produce close to zero crude, due to U.S. sanctions, lower global demand and the state of the country’s infrastructure, consultancy IHS Markit said in a report.
Refined product demand has gradually recovered since April, although product inventories remain high, TD Energy analyst Menno Hulshof said in a note.
Light synthetic crude from the oil sands for September delivery traded at $2.25 a barrel under WTI, from Wednesday’s settle of $2.75 under.
Global oil prices eased after the International Energy Agency lowered its 2020 oil demand forecast due to unprecedented travel restrictions to fight the coronavirus.