January 24, 2018 – Financial Post
Canadian oil prices buckle after railway refuses to be 'swing shipper'
With new pipelines at least three years away, transportation capacity is so tight in Canada’s oil industry that every twitch in the system appears to be blowing out the discount
By: Claudia Cattaneo
World oil prices are recovering, but Western Canadian oil prices are falling back to depressed conditions, the result of transportation capacity so tight every twitch in the system appears to be blowing out the discount.…
… Peter Howard, president emeritus of the Canadian Energy Research Institute, said “times are tough in the Canadian oilpatch,” despite production growth from about 2.5 million barrels a day in 2011 to almost 4.0 million barrels a day by the end of 2017, mostly from the oilsands.
“While other North American producers have been enjoying the gradual rise in WTI pricing over the past year, Canadian producers have suffered through declining prices for WCS, the Canadian heavy blend crude benchmark — especially over the past few months,” Howard writes in a blog for RBN Energy.
WCS had a pricing discount to WTI of around US$10 a barrel until late summer 2017, but it began to grow and eventually crashed in November to around US$25 a barrel, coinciding with the Keystone leak.
“Storage and crude-by-rail shipments have served as a cushion of sorts, absorbing shocks like the Keystone outage and the apportionments, but with more production gains expected in 2018-2019, that cushion seems uncomfortably thin and unforgiving,” writes Howard, warning the widening differential is not a short-term phenomenon.