Gluts, price differential: Six things to know about Canada’s oil-price gap

EDMONTON — The Alberta government has ordered a mandatory cut to crude oil production next year to deal with historically low prices being paid for Canadian oil. Here are six things to know about Canada’s resource:

Light or heavy: Each type of oil around the world has its own price. New-York-traded West Texas Intermediate (WTI), delivered at Cushing, Okla., is the benchmark price for light crude oil in North America. Western Canadian Select (WCS) is the reference price for heavy crude oil from the oilsands delivered at Hardisty, Alta.

Price differential: Canada’s heavy crude usually trades at a discount because of refining and transportation costs, so a price gap or differential is typical between WTI and WCS.

Record gap: The differential is usually between US$10 to US$15 per barrel. The biggest gap — US$52 per barrel — was recorded in October. Experts say the extreme discount happened due to a reliance on high-cost transportation — rail and truck — instead of new pipelines.

The glut: Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out. Roughly 35 million barrels, about twice the normal level, are in storage.

Cutting production: The province has ordered the output of raw crude oil and bitumen to be reduced by 8.7 per cent, or 325,000 barrels per day, starting in January. As the excess storage clears, the reduction is expected to drop to 95,000 barrels a day until the end of next December. The move is expected to narrow the differential by at least $4 per barrel.

Winners and losers: Calgary economist Trevor Tombe says $4 per barrel doesn’t sound like much but, over a year, it’s worth about $1 billion to the Alberta government’s budget. While some companies will also benefit, those with their own refining and upgrading operations may not.

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Heatwave welcomed by farmers

Warmth will help some crops catch up after wet spring

40 million masks provided to Albertans

The Alberta government’s mask distribution program has ended, with 40 million non-medical… Continue reading

Rollout of COVID-19 Alert app faces criticism over accessibility on older phones

The app requires users to have Apple or Android phones made in the last five years

The latest numbers on COVID-19 in Canada for Aug. 3

Alberta at more than 10,000 confirmed

David Marsden: Back-to-school plan makes sense

Albertans are wise to propose ways to improve students’ return to classrooms… Continue reading

NHL hit with criticism over English-only version of “O Canada” on Saturday

NHL hit with criticism over English-only version of “O Canada” on Saturday

Blackhawks’ Caggiula suspended for Game 2 vs. Oilers

Blackhawks’ Caggiula suspended for Game 2 vs. Oilers

Jets rebound with 3-2 win over Flames, even qualifying series 1-1

Jets rebound with 3-2 win over Flames, even qualifying series 1-1

Penguins beat Canadiens 3-1 in Game 2 to pull even in best-of-five series

Penguins beat Canadiens 3-1 in Game 2 to pull even in best-of-five series

Danielle Kang wins at Inverness in LPGA return to golf

Danielle Kang wins at Inverness in LPGA return to golf

Thomas holds off Koepka to win WGC in Memphis, reclaim No. 1

Thomas holds off Koepka to win WGC in Memphis, reclaim No. 1

Koepka’s biggest challenge is history in bid for 3 in a row

Koepka’s biggest challenge is history in bid for 3 in a row

Most Read