The discount on Western Canada Select crude oil to North American benchmark West Texas Intermediate futures narrowed again on Tuesday as the U.S.-Israeli war on Iran continues to tighten global sour spreads.
WCS for April delivery in Hardisty, Alberta, settled at $12.40 a barrel below the U.S. benchmark WTI, according to brokerage CalRock, compared to $12.70 on Monday.
* The WCS differential has narrowed by $1.25 a barrel since the start of the week and the beginning of the Iran crisis.
* With the Strait of Hormuz closed, there is a structural physical deficit in heavy and sour grades of crude oil in Asia, which will create demand for Canadian heavy barrels exported off the British Columbia coast via the Trans Mountain pipeline, said Patrick O’Rourke with ATB Cormark Capital Markets.
* Canadian oil producers are well-positioned in the near-term given the supply deficit of heavy crude, O’Rourke said. Longer-term, the current crisis reinforces the importance Canadian production as a reliable, democratic supplier, he added, but cautioned Canada’s ability to increase oil output remains constrained by limited pipeline export capacity.
* Global oil prices jumped on Tuesday as the U.S.-Israeli war on Iran halted energy exports from the Middle East, with Tehran attacking ships and energy facilities, closing navigation in the Gulf and forcing production stoppages from Qatar to Iraq.
(Reporting by Amanda Stephenson in Calgary; Editing by Sahal Muhammed)