The discount on Western Canada Select to North American benchmark West Texas Intermediate futures widened on Tuesday, but analysts said Canadian heavy crude is unlikely to be significantly impacted in the short-term by the situation in Venezuela.
WCS for February delivery in Hardisty, Alberta, settled at $13.80 a barrel below the U.S. benchmark WTI, according to brokerage CalRock, compared with $13.55 on Monday.
Analysts and traders are assessing the potential for further weakening, but so far the U.S. capture of Venezuelan President Nicolas Maduro has had minimal impact on the Canadian WCS differential.
While a rapid ramp-up of Venezuelan oil production could meaningfully pressure Canadian heavy oil prices over the mid-term, said a TD Cowen report, that is unlikely. Canada’s scale, rule-of-law and infrastructure work in its favour, the report said.
If Venezuela did significantly increase its output, its crude would have a location advantage over Canadian heavy oil barrels in the U.S. Gulf Coast. But the vast majority of Canada’s crude exports flow to the U.S. Midwest, which is far less exposed due to its close proximity to Canada and existing pipeline network, ATB Capital noted in a report.
Canadian oil prices in the near future will be driven more by factors like OPEC+ policy, Canadian west-coast egress, Russian exports, and global demand, rather than the situation in Caracas, ATB Capital said.
Global oil prices fell on Tuesday as the market weighed expectations of ample global supply this year against uncertainty around Venezuelan crude output after the U.S. capture of Nicolas Maduro, the South American country’s leader.
(Reporting by Amanda Stephenson in Calgary; Editing by Alan Barona)