Gluts, price differential: 6 things to know about Canada’s oil-price gap

Alberta says about 190,000 barrels of raw crude oil and bitumen are being produced each day that can’t be shipped out

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.

READ MORE: B.C. gas prices to hit highest levels in years: GasBuddy forecast

READ MORE: Alberta cuts oil production to help deal with low prices

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.

The Canadian Press

Like us on Facebook and follow us on Twitter.

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

Just Posted

Wetaskiwin Legion ‘Branch Briefings’

Branch #86 is planning its 90th anniversary

Feed replacement cost, precipitation threshold and more tweaked by AFSC

AFSC announces enhancements to perennial crop insurance programs

Road allowance closure goes to prov govt

Encroaching house situation could set ‘precedent’

County of Wetaskiwin council approves water rate hike of 3 per cent

Councilors balk at proposed rate increase of 4 per cent

Trudeau hypocrite on Iran plane crash

Writer says P.M. not that concerned about China hostages

VIDEO: Mass coronavirus quarantines seen in China won’t happen in Canada, authorities say

‘If a case comes here, and it is probably … it will still be business as normal’

Wuhan bans cars, Hong Kong closes schools as coronavirus spreads

Hong Kong leader Carrie Lam said her government will raise its response level to emergency, highest one

RCMP receive tip on Amber Tuccaro’s homicide file

Banff RCMP contacted by a male who alleged that his father may be responsible for a missing person

Here’s what Canada is doing to stop the coronavirus from getting in

Health officials are monitoring multiple possible cases in Canada

Province investigating death of Samson Cree Nation youth in care

16-year-old found deceased outside in Rocky Mountain House

Blackfalds RCMP investigate fatal motor vehicle collision

Collision occurred at the intersection of Highway 11 and Burnt Lake Trail

Former Mountie, sports coach convicted of sex abuse in B.C. granted day parole

Alan Davidson was sentenced to almost six years for abusing seven boys in the late 1970s and early 1990s

Alberta privacy watchdog investigates ID scans at liquor stores

Alcanna Ltd., based in Edmonton, runs Liquor Depot, Wine and Beyond and Nova Cannabis stores

Survey finds support among Canadians for broader assisted-dying law

The survey was conducted Jan. 17 to 21 among 1,552 Canadians eligible to vote

Most Read