Canadian light oil prices hit with same discounts afflicting oilsands prices

CALGARY — The same factors that have inflated the discount paid for Canadian oilsands heavy crude compared with U.S. oil are also driving a substantial rise in the discount for light Canadian oil.

Accounting firm Deloitte says in a report that the difference between New York-traded West Texas Intermediate and Edmonton Light oil prices widened to US$7.32 per barrel in January, an 86 per cent increase over the average of US$3.93 per barrel in the fourth quarter of last year.

Deloitte partner Andrew Botterill says the lower relative pricing for Canadian crude is partly caused by pipeline capacity constraints as oil production rises in Canada. A key conduit to the U.S. market, TransCanada Corp.'s Keystone pipeline, remains at lower capacity following a leak in November.

He says there's also less room for Canadian crude in American refineries, which are running at a 13-year high of more than 90 per cent of capacity, because of strong U.S. crude oil production in 2017.

Deloitte predicts that Canadian price differentials will start to return to historic norms as the new Sturgeon Refinery northeast of Edmonton ramps up production this year, soaking up some of Alberta's oilsands crude surplus, and as more refinery room becomes available in the U.S.

It adds that the Alberta government's recent initiatives to encourage building partial upgrading facilities for oilsands crude, if successful, will also help free up more export pipeline room.

About 850,000 barrels per day of Canada's oil production is conventional light oil — the rest of the 4.5 million bpd total is oilsands bitumen and conventional heavy oil.

Companies mentioned in this article: (TSX:TRP)

The Canadian Press