The discount on Canadian heavy crude versus the West Texas Intermediate (WTI) benchmark tightened on Thursday.
Western Canada Select (WCS) heavy blend crude for August delivery in Hardisty, Alberta, last traded at $19.50 a barrel below WTI, according to NE2 Group, narrowing 35 cents from the previous day.
Canadian benchmark heavy crude has traded at a wide differential to benchmark crude in recent months due to the U.S. Strategic Petroleum Reserve (SPR) release of predominantly sour barrels. As the SPR release tapers off heavy prices could strengthen, but that may be offset by increasing oil sands supply, analysts said.
Light synthetic crude from the oil sands for August delivery was priced at $7.00 a barrel over WTI, unchanged from the previous day.
Synthetic prices have been strong throughout the summer due to maintenance on major oil sands upgraders, which produce refinery-ready synthetic crude, and surging demand for synthetic crude’s high distillate yield.
However, turnarounds on upgraders including Canadian Natural Resources Ltd’s Horizon project and the Shell-run Scotford plant are now complete and demand for distillate is softening. Canadian Natural’s President Tim McKay told an earnings call he expects synthetic prices to weaken in coming months.
Global oil prices dropped to their lowest levels since before Russia’s February invasion of Ukraine, as traders fretted over the possibility of an economic recession later this year that could torpedo energy demand.