Oil trades near $100 a barrel, but Canadian crude sells at a steeper discount

WTI, the North American benchmark, was valued at around $100 a barrel on Tuesday. Canadian crude is not getting the same lift.

Western Canadian Select, the heavier blend produced in Alberta, has recently sold for around $20 to $25 a barrel below WTI. That is well above its typical discount of about $12 US.

Al Salazar, head of macro research at Enverus, said: "While the sexy headlines are saying 'triple-digit oil, way to go,' Canadian producers are subject to WCS pricing."

The gap has widened over the last couple of months. Shipping tanker rates have risen, and more Venezuelan oil is going to U.S. refiners, which Canadian crude has to compete with for refining capacity on the Gulf Coast. WTI is easier to refine and yields more gasoline; WCS is a heavier, sour blend.

Canadian pipelines are largely at capacity. Richard Masson, former CEO of the Alberta Petroleum Marketing Commission, said oilsands production keeps growing and the pipes cannot keep up. "That's probably what's going to happen over the course of this winter, at least," he said.

Charles St-Arnaud, chief economist at Servus Credit Union, said the wider gap reduces the value of Alberta's oil exports. "We're getting less money per barrel than we would hope to have, and that can be quite important," he said. He added that the price per barrel is still very attractive compared with recent years, and that royalties are expected to remain positive, though reduced. Consumers are unlikely to see a difference at the pump from the wider differential, he said.

Expansion projects from Enbridge and the Trans Mountain pipeline could add capacity within the next few years. The proposed Pacific Link pipeline to the West Coast would open more access to Asian markets, where Canadian crude is fetching a premium, but its earliest in-service date is 2032.