The discount on benchmark heavy Canadian crude surged drastically wider on Tuesday, hitting $31 a barrel below the U.S. benchmark West Texas Intermediate (WTI) crude:
Western Canada Select heavy blend crude for November delivery settled at $31 a barrel under WTI, according to NE2 Inc, diving from Friday’s settlement of $25.25 a barrel under WTI. Monday was a market holiday in Canada.
Market players attributed the selloff to a number of factors, including concerns among traders that the low level of the Mississippi river could lead to Midwest refiners cutting runs as they struggle to barge products to market.
Midwest refinery maintenance and the shutdown of BP’s Toledo, Ohio, refinery after a fire also contributed to a reduction in heavy crude demand.
One industry participant said stop loss orders had been triggered by the big move in WCS prices.
Meanwhile, the ongoing U.S. Strategic Petroleum Reserve release has weighed on Canadian barrels all summer, particularly barrels delivered to the U.S. Gulf Coast.
Global oil prices settled 2% lower, extending the previous session’s almost 2% decline, as recession fears and a flare-up in COVID-19 cases in China raised concerns over global demand. (Reporting by Nia Williams)