Heavy discount narrows as global prices weaken further

Canadian heavy crude’s discount narrowed versus U.S. benchmark West Texas Intermediate (WTI) oil on Wednesday, held in check by weak global prices and declining inventories.Western Canada Select (WCS) heavy blend crude for April delivery in Hardisty, Alberta, was trading at $12.75 per barrel below WTI, according to NE2 Canada Inc, tighter than Tuesday’s settle of $13.15 under.

The lack of major movement in the differential reflects uncertainty among traders about the market’s direction, a trader said. Alberta inventories have been declining, but a global glut due to a Saudi-Russian price war risks causing a build-up again.

The heavy differential was as little as $10.50 on Monday, the smallest since Aug. 21, 2019.

The Canadian province of Alberta will curtail oil production further if necessary to help an industry which is set to start laying off workers in response to a global price war, its premier said.

Canadian oil producers Cenovus Energy and MEG Energy announced on Tuesday cuts to their capital spending and production plans for the year amid an erupting Saudi-Russia oil price war.

Light synthetic crude from the oil sands traded at $1.50 over WTI, narrower than Tuesday’s settle of $1.70 over.

Global oil prices fell 4% after the World Health Organization said the global coronavirus outbreak is now a pandemic, and as major oil producers announced plans to escalate the burgeoning price war.