The price of Canadian heavy oil has hit a 10-year low compared with benchmark North American crude as a shortage of pipeline capacity and refinery maintenance have combined to cause a growing glut of crude in Alberta.
Lack of space on pipelines to transport the product will dog the industry, at least until Enbridge Inc. can complete its Line 3 replacement project in late 2019, analysts said on Friday. The steep discounts could ease later this fall as planned maintenance at U.S. refineries comes to an end. Expanding rail capacity will also help relieve the bottlenecks.
Alberta Premier Rachel Notley complained this week that widening price differentials are costing Canadian producers and governments upward of $40-million a day.
In trading on Friday, Western Canadian Select (WCS) was priced US$45 a barrel less than West Texas Intermediate (WTI), which climbed to US$74.33, according to Net Energy, an oil trading firm. That is the steepest discount for WCS since late 2007, and left the Canadian heavy crude valued at US$30, or the equivalent of $39 a barrel.
Canadian producers are in fact facing a “double discount” relative to world oil prices, as the price difference between WTI and Brent International has widened to US$10 a barrel.
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