Canadian Heavy Crude Discount Narrows Against WTI

The Canadian heavy oil discount narrowed on Monday against the West Texas Intermediate (WTI) benchmark as the new monthly trade cycle got underway, though it remained wider than normal on limited capacity on Canadian export pipelines.Western Canada Select (WCS) heavy blend crude for May delivery in Hardisty, Alberta, settled at $19.35 a barrel below the WTI benchmark crude price , according to Shorcan Energy brokers, compared with Thursday’s settle of $22.00.

The deeper-than-normal discount is expected to persist for the foreseeable future, as rising production in Alberta’s oilsands outstrips pipeline and rail shipping capacity.

Once the rails are able to move incremental barrels down to key demand centers like the U.S. Gulf, the discount could narrow into the high teens, prompting producers to hedge to lock in the differential, said Michael Tran, energy strategist at RBC Capital Markets.

Oil prices fell more than 2 percent on Monday pressured by a rise in Russian production, expectations of a Saudi Arabia crude price cut, and a deepening trade spat between China and the United States.

An expected return of TransCanada Corp’s Keystone pipeline to full pressure, following a November leak, would help reduce the discount, traders have said.

Light synthetic crude from the oil sands for May delivery last traded at $0.75 over WTI, slightly narrower than Thursday’s settle of $1.00 over WTI.