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.

Just Posted

Federal candidates talk most pressing issues in Revelstoke

Concerns include jobs, logging, climate change, affordable housing, Highway 1

Kootenay-Columbia riding candidates have Canada’s highest expense limit

Facebook data also shows who is buying ads on the social media website

Revelstoke roads and weather: avalanche control planned

Expect 20 min road closures west of Revelstoke on Oct. 21

Competition shakes up for the Okanagan Mixoff

The Okanagan Mixoff takes place Nov. 7 in Kelowna

Woman, 24, faces life-altering injuries after being dragged 4 blocks by vehicle in Vancouver

A gofundme account says the woman will have to undergo multiple complex surgeries

Fatal overdoses down by 33% in B.C., but carfentanil deaths continue to spike

Carfentanil, an illicit drug more powerful than fentanyl, causing more deaths than ever

South Okanagan dangerous offender guilty plea struck down

Trial delayed again because Ronald Teneycke failed to elect his choice of trial

Six bears destroyed in three days in West Kelowna

A West Kelowna business has been charged for leaving garbage around Lake Okanagan Resort

Police standoff ends peacefully in West Kelowna

A distraught man was taken into custody Wednesday afternoon

A year after pot legalization in Canada, it’s a slow roll

It’s one year into Canada’s experiment in legal marijuana, and hundreds of legal pot shops have opened

Most Read