Discounts

The price discount for Canadian heavy crude benchmark Western Canadian Select (WCS) sold in Hardisty, Alberta versus Gulf Coast equivalent heavy grade Maya has narrowed from $35/Bbl last November to less than $12/Bbl today. The discounts to Maya this year have been less than the cost of rail transportation between Western Canada and the Gulf Coast – reflecting improving crude takeaway capacity. Next month the 600 Mb/d Flanagan South pipeline from Chicago to Cushing and the 450 Mb/d Seaway Twin from Cushing to Houston will open more new capacity for Canadian crude to compete against Maya at the Gulf Coast. The result is likely to be even lower differentials. Today we discuss the likely impact.

Western Canadian producers regularly have to swallow large price discounts for heavy crude versus the US benchmark West Texas Intermediate (WTI). During the first week of November price discounts for heavy Western Canadian Select crude versus WTI came close to $42/Bbl – the deepest since 2007. Since then they have narrowed but are still over $30/Bbl. Today we examine the relationship between storage volumes in Alberta and crude price discounts.