Brian Zinchuk is editor and owner of Pipeline Online
Graphic licensed to Brian Zinchuk via Storyblocks
If you haven’t been paying attention to oil markets, now might be the time, as significant benchmarks have hit their lowest point in nearly year for WTI, and nearly two years for WCS.
According to BNN Bloomberg, as of 2:25 p.m. on Dec. 5, Western Texas Intermediate (WTI) was trading for US$74.28, down US$2.65. That price is the lowest since closing at US$73.79 per barrel on Dec. 23, 2021, nearly one year ago.
But it’s Western Canadian Select (WCS) which has been much harder hit. It was trading at US$46.05 per barrel, down US$3.00. That’s the lowest price for WCS since Feb. 4, 2021.
While there is always a differential due to the quality of oil (heavy oil being of a lower quality and more difficult to handle and refine), when the differential gets this high, it means money is being left on the table. The nearly US$28 differential is now getting in the range where, historically, the Saskatchewan government has expressed concern about the WCS/WTI differential, and the lost potential revenues as a result. Increased takeaway capacity, specifically pipelines to tidewater, have been seen as an answer. While the Trans Mountain Expansion is under construction, it is taking much longer than expected, and is more than double its budget. The proposed Northern Gateway and Energy East projects, both of which were supposed to be in service several years ago, were both killed in 2015 and 2018, respectively.
These numbers also mean that all geopolitical risk from the Ukraine war have been eliminated from the market, despite the war being nowhere close to over, and Russia under significant sanctions for oil and gas export. While Canada had, in the early days of the war, promised to increase oil production by 300,000 barrels per day, both Premier Scott Moe and former Alberta Premier Jason Kenney, at the Lloydminster Heavy Oil Show in September, noted they have heard nothing from the federal government to make that happen.
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