The discount on benchmark heavy Canadian crude versus West Texas Intermediate tightened on Wednesday.
Western Canada Select heavy blend crude for October delivery traded at $20.20 a barrel under WTI, according to NE2 Canada, narrowing 15 cents from the previous day.
WCS has traded around $20 a barrel below U.S. futures for much of the summer, pressured by the release of oil from the U.S. Strategic Petroleum Reserve and strong demand for lighter crudes globally due to high refined product prices.
Canadian heavy crude differentials will depend on how rapidly western Canadian oil production grows over the next 18 months, with signs that pipeline capacity could get tight, said Aaron Brady, executive director at S&P Global Commodity Insights.
On the demand side, BP Plc restarted the largest crude distillation unit at its 435,000 barrel-per-day (bpd) Whiting, Indiana, refinery over the weekend, a company spokesperson said. Whiting is one of the largest buyers of Canadian crude.
Global oil prices fell sharply, slumping below levels seen prior to Russia’s invasion of Ukraine, as downbeat Chinese trade data fed investor worries about recession risks.