The discount on Western Canada Select crude oil to North American benchmark West Texas Intermediate futures narrowed on Friday, continuing its retreat from troughs reached earlier in the week but remaining at a historically wide spread.
WCS for December delivery in Hardisty, Alberta, settled at $26 a barrel below the US benchmark WTI, compared with $27.50 on Thursday, according to brokerage CalRock. The discount remains more than $14 wider than it was last year at this time.
* Steep discounts on Canadian heavy crude have historically been a result of a lack of pipeline capacity out of the Western Canadian Sedimentary Basin.
* This time, the widening is being driven by a combination of constrained Canadian export capacity, increased competition from Venezuelan heavy crude, and surging freight rates globally caused by ongoing disruptions in the Middle East.
* Lower tanker freight rates, additional Canadian pipeline capacity or stronger demand for Canadian heavy barrels could help narrow the differential, an East Daley Analytics note said. But the note added that with planned Trans Mountain and Enbridge expansions not expected to provide additional capacity until 2027, until one or more of these constraints ease, Canadian heavy crude is likely to remain under pricing pressure relative to WTI.
* Global oil prices were set for a sharp weekly fall after the election losses of US President Donald Trump’s Republican Party raised hopes of a de-escalation in the US-Israeli war on Iran, though attacks on vessels in the Middle East continue to provide a floor to crude.
(Reporting by Amanda Stephenson in Calgary; Editing by Perla Velasco)