Heavy discount widens with congested transport, big stocks

The discount on Canadian heavy crude widened versus U.S. benchmark West Texas Intermediate (WTI) crude on Tuesday, as congested transport and high inventories weakened prices.Many western Canadian grades have seen weakening prices, with crude by rail movement seeming to flatten in recent weeks, and storage levels remaining elevated, said Matt Murphy, analyst of upstream and integrateds for Tudor Pickering Holt & Co.

Murphy added that more diluent is required to move bitumen through pipelines during intense cold, taking up more capacity.

Western Canada Select (WCS) heavy blend crude for February delivery in Hardisty, Alberta, was trading at $23.60 per barrel below WTI, according to NE2 Canada Inc, wider than Monday’s settle of $23.25.

The spread touched $24 on Friday, the biggest discount since early December 2018.

Royal Bank of Canada revised on Monday its forecast of the WCS-WTI differential to $20 per barrel from $17.55 previously, citing high storage levels and the impact of IMO 2020 regulations on light-heavy spreads.

Light synthetic crude from the oil sands traded at $4.85 below WTI, compared with Monday’s settle of $4.50 under.

Global oil prices climbed after five days of declines as the United States and China prepared to sign a preliminary trade deal and as Middle East tensions eased.