• 4 minute Hey Oil Bulls - How Long Till Increasing Oil Prices and Strengthening Dollar Start Killing Demand in Developing Countries?
  • 8 minutes Could oil demand collapse rapidly? Yup, sure could.
  • 15 minutes Oil and Trade War
  • 3 hours Oil prices going down
  • 44 mins Could oil demand collapse rapidly? Yup, sure could.
  • 7 mins Migrants: Italy Wants EU Border Agency In Africa, Not At Sea
  • 7 hours Sabotage at Tesla
  • 42 mins What If Canada Had Wind and Not Oilsands?
  • 6 mins Sell out now or hold on?
  • 15 hours Oil and Trade War
  • 15 hours venezuala oil crisis
  • 2 hours Trump Hits China With Tariffs On $50 Billion Of Goods
  • 18 hours Malaysia's Petronas vs. Sarawak Court Case - Will It End Up In London Courts?
  • 15 hours When will oil demand start declining due to EVs?
  • 17 hours Russia and Saudi Arabia to have a chat on oil during FIFA World Cup - report
  • 3 hours The Irrelevance Of BTU Rating - Big Oil's Gimmick To Hoodwink The Public
  • 3 hours After Three Decade Macedonia End Dispute With Greece, new name: the Republic of Northern Macedonia
  • 14 hours Germany Orders Daimler to Recall 774,000 Diesel Cars in Europe
  • 11 hours The Wonderful U.S. Oil Trade Deficit with Canada
China’s Oil Demand Could Take A Big Hit

China’s Oil Demand Could Take A Big Hit

In the last three years…

Is This The Most Contentious OPEC Meeting Yet?

Is This The Most Contentious OPEC Meeting Yet?

OPEC’s members have been divided…

Deloitte: WCS-WTI Oil Price Gap Could Ease In 2018

refinery

The wide discounts to which Canadian oil benchmarks are priced to WTI could diminish later this year as increased refinery capacity on both sides of the border would give more outlets to Canadian producers, consulting firm Deloitte said in a forecast on Tuesday.

Transportation bottlenecks since the end of last year have blown out the price differential between Western Canadian Select (WCS) and WTI, and at the end of last year WCS traded at a discount of US$30 to WTI as the transportation capacity was unable to keep up with rising production from new oil sands projects sanctioned before the downturn.

At the end of Q1 2018, additional storage capacity in Alberta and data about fewer crude-by-rail shipments added to concerns of a domestic oil glut, as TransCanada’s Keystone Pipeline has yet to return to normal pressure levels following a leak and temporary shutdown last November.

“WTI (West Texas Intermediate) crude prices pulled away from Canadian crude prices in the quarter as supply in Canada exceeded pipeline capacity, causing transportation issues north of the border,” Deloitte said in its forecast on Tuesday, as carried by Calgary Herald.

Currently, WCS trades at around US$27 discount to WTI.

But according to the consultancy, the gap could start to narrow later this year, as the Sturgeon refinery northeast of Edmonton is nearing completion, and U.S. refinery capacity is rising. Keeping full crude pipeline operations would also play a role in narrowing the discount, Deloitte says.

For Edmonton Light, the discount jumped to US$7.32 per barrel in January, after averaging US$3.93 in Q4 2017, the consultancy said, adding that this discount is expected to narrow to around US$3.50 by 2019.

Related: Is Russia Cheating On The OPEC Deal?

“The announcement by the Government of Alberta to support partial refinery upgrading in the province by 2019 might help to alleviate WCS (Western Canadian Select) price volatility, as producers would have additional domestic options to sell heavy crude oil,” said Deloitte.

Other analysts, however, expect transportation problems to persist, weighing on the price of WCS.

The Enbridge, Kinder Morgan, and TransCanada pipeline projects have yet to be approved, and “as it stands now, no new pipeline capacity will begin operating until at least early 2020,” RBN Energy said last month.

The wide WCS-WTI discount is unlikely to improve much any time soon, because the cushion of in-region storage and crude-by-rail (CBR) shipments “seems uncomfortably thin” due to an expected increase in heavy oil production this year and next, RBN Energy said.

By Tsvetana Paraskova for Oilprice.com

More Top Reads from Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News