The discount on Western Canada Select crude oil to North American benchmark West Texas Intermediate futures widened again on Monday.
WCS for December delivery in Hardisty, Alberta, settled at $27 a barrel below the US benchmark WTI, compared to $29.75 on Friday, according to brokerage CalRock. The discount is now more than double what it was in September and is at its widest since 2018.
* Historically, steep discounts on Canadian heavy crude have come as a result of a lack of pipeline capacity out of the Western Canadian Sedimentary Basin.
* This most recent widening, however, has nothing at all to do with pipeline capacity, said Rory Johnston, founder of the Commodity Context newsletter. Instead, the main factor is globally high freight rates which have sharply cut export demand for Canadian barrels being re-exported off the US Gulf Coast.
* “At the same time, the heavy sulfur fuel oil market in the US Gulf Coast is also glutted, because refineries are running all out,” Johnston said.
* WCS differentials at Houston are now wider than the previous all-time high of $20.60 per barrel under WTI realized on October 2022.
* Monday marked the start of the Canadian crude market’s trade cycle, which runs from the first of each month until the day before pipeline nominations are due, and in which the bulk of trading activity takes place.
* Oil prices fell more than 7% on Monday as talks between Iranian and Qatari officials lifted hopes for an end to the US-Israeli war with Iran and stabilization of Middle East crude supply.
(Reporting by Amanda Stephenson in Calgary; Editing by Perla Velasco)