The discount on Western Canada Select crude oil to North American benchmark West Texas Intermediate futures widened on Thursday.
WCS for March delivery in Hardisty, Alberta, settled at $15.25 a barrel below the U.S. benchmark WTI, according to brokerage CalRock, compared with $15.15 a barrel on Wednesday.
* The discount on Canadian heavy crude widened approximately $1 per barrel over the month of January in the wake of heightened market volatility caused by U.S. President Donald Trump’s stated goal to increase Venezuelan oil production.
* Investors are watching for the potential for an increase in Venezuelan barrels to compete with similar-in-quality Canadian heavy oil in the U.S. Gulf Coast over the longer term.
* The initial market reaction may have been overblown in the wake of the onslaught of headlines about Venezuela, said Wood Mackenzie analyst Dylan White. But he added he does expect to see some level of displacement of Canadian barrels along the Gulf Coast in the long-term, meaning the WCS differential is likely not heading back to its pre-January levels anytime soon.
* “Directionally, we do expect that light-heavy widening to persist,” White said.
* The Western Canadian Select benchmark price recorded a single-day volume record of 19,965 lots traded on the Intercontinental Exchange on January 6, the day Caracas and Washington reached a deal to export up to $2 billion worth of Venezuelan crude to the United States, prompting concerns those South American barrels would displace Canadian barrels at the Gulf Coast.
* Global oil prices settled down almost 3% on Thursday in choppy trading, after the U.S. and Iran agreed to hold talks in Oman on Friday, easing concerns about Iranian crude supplies.
(Reporting by Georgina McCartney in Houston; Editing by Krishna Chandra Eluri)