Western Canada Select (WCS) crude’s discount to the benchmark West Texas Intermediate (WTI) tightened on Monday.
WCS for February delivery in Hardisty, Alberta, traded between $26.10 and $25.75 a barrel below WTI, according to brokerage CalRock. On Friday WCS traded between $26.45 and $26.25 a barrel under U.S. crude.
The Canadian heavy crude discount has narrowed since TC Energy restarted its Keystone pipeline in December after a leak of 14,000 barrels in Kansas. The 622,000 barrel-per-day pipeline delivers Canadian crude to U.S. refineries.
On Monday, TC said it has entered into a clean-up agreement with the U.S. Environmental Protection Agency, but it was too early to speculate on the cost of the work.
Strong demand for Canadian heavy crude from U.S. refiners is expected to bolster WCS prices in 2023 after a lacklustre performance last year, BMO Capital Markets analyst Randy Ollenberger said in a note to clients.
Ollenberger said WCS demand would also be boosted by the start-up of Pemex’s Dos Bocas refinery in Mexico in 2023 and the Canadian government-owned Trans Mountain pipeline expansion in 2024, helping differentials narrow further.
Global oil prices rose over 1% after China’s reopened borders boosted the outlook for fuel demand and overshadowed global recession concerns.