Heavy crude discount deepens, synthetic premium surges

The discount on Canadian heavy crude versus the West Texas Intermediate (WTI) benchmark widened on Wednesday, while the premium on synthetic crude from the oil sands jumped markedly higher.

Western Canada Select (WCS) heavy blend crude for August delivery in Hardisty, Alberta, last traded at $21.80 a barrel below WTI, according to NE2 Group, widening from $20.25 a barrel under the benchmark on Tuesday.

Light synthetic crude from the oil sands for August delivery raced higher, settling at $14.25 a barrel over WTI, up from around $10.75 a barrel the previous day.

Scheduled maintenance on oil sands upgraders, including the Syncrude project, is contributing to tight synthetic supply, but market players said strong demand for distillates was also pushing prices sharply higher. Canadian light synthetic crude has a high middle distillate yield, making it particularly attractive to refiners in recent months.

One Calgary-based industry source said demand for heavy crude was being dampened by maintenance at major U.S. Midwest refineries, as well as the ongoing release of heavy barrels from the U.S. Strategic Petroleum Reserve.

Global oil prices slid about 2% to a 12-week low in volatile trade, extending the prior session’s heavy losses, as investors grew more worried energy demand would take a hit in a potential global recession.