The discount of Western Canada Select (WCS) heavy crude to the North American benchmark West Texas Intermediate futures (WTI) continued its tightening trend on Tuesday, settling below $9 for the first time in approximately five years.
WCS for June delivery in Hardisty, Alberta, settled at $8.95 a barrel under the U.S. benchmark WTI, according to brokerage CalRock, after having settled at $9.15 under the U.S. benchmark on Monday.
The last time Canadian heavy crude traded at such a tight discount to the U.S. benchmark was in 2020, amidst global pandemic-related oil price volatility, said Rory Johnston, energy analyst and founder of the Commodity Context newsletter.
* Canadian heavy crude has been trading at a tight discount in recent months in part due to the opening of the Trans Mountain pipeline expansion one year ago, which boosted the country’s oil export capacity. WCS also typically sees seasonal strength this time of year as the return of summer driving season ramps up refinery demand, Johnston said.
* Marathon, the top U.S. refiner by volume, said Tuesday it plans to operate its refineries at 94% of their combined capacity in the second quarter, up from 89% capacity in the first quarter.
* Globally, oil prices climbed about 3% on Tuesday on signs of higher demand in Europe and China, lower production in the U.S., tensions in the Middle East and as buyers emerged the day after prices fell to a four-year low.
(Reporting by Amanda Stephenson in Calgary; Editing by Alan Barona)