Heavy Canadian crude’s discount to the U.S. benchmark blend expanded to the widest this year as Alberta increases output limits and oilsands producers forge ahead with new projects.
Western Canadian Select traded at $21.13 less per barrel than West Texas Intermediate on Tuesday, the widest discount since Dec. 31. The differential had been as narrow as $9.33 a barrel in January.
The discount is widening after Alberta increased the amount it’s allowing drillers to produce, easing an unprecedented curtailment program put in place last year amid a collapse in local crude prices. The limit was set at 3.71 million barrels a day for June, up 150,000 barrels from when the curtailment was enacted.
Oilsands producers including Canadian Natural Resources, Cenovus Energy and Imperial Oil are also pushing ahead with expansions, while new export pipeline projects such as Enbridge’s Line 3 expansion have faced further delays.
The widening discount has a silver lining in that it makes Canadian crude more economical to move to refineries by rail, a more expensive transport option that has become increasingly important as Alberta’s pipelines remain overwhelmed.