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

Nanoose residents want court sports at their local park

Regional District of Nanaimo plans to redevelop Jack Bagley Park

UPDATE: Furry fire victims recovering in Nanaimo

Two dogs and cat recovering from smoke inhalation expected to make full recovery

Process to identify those killed in Gabriola plane crash could take days

Canadian flight museum suggests Alex Bahlsen of Mill Bay died in Tuesday’s crash

UPDATE: One person dead after crash on Nanaimo Lakes Road

One person dies, another was injured in the accident which happened at about noon Wednesday

Conservation officers put down fawn blinded by pellet gun in Nanaimo

Young deer found near construction site in Hammond Bay area

UPDATE: One person dead after crash on Nanaimo Lakes Road

One person dies, another was injured in the accident which happened at about noon Wednesday

Raptors fans show Kawhi the love in his return to Toronto

Leonard receives championship ring, leads new club to win

First Snuneymuxw Fight Night to be held at community gym

Eli Wyse facing Quesnel opponent in main event of boxing card Saturday, Dec. 14

GUEST COMMENT: City should stop catering to fast-food drive-thrus

Eliminate drive-thrus to improve safety and health and reduce emissions, says guest columnist

Dover Bay Secondary School drama program to stage ‘Addams Family’ musical

Production is first high school musical for teacher and some students

Laid-off forest workers converge on B.C. legislature

Loggers call for action on strike, provincial stumpage

‘Honest mistake:’ RCMP says B.C. cannabis shop can keep image of infamous Mountie

Sam Steele wearing military, not RCMP uniform in image depicted in Jimmy’s Cannabis window

B.C. guide fined $2K in first conviction under new federal whale protection laws

Scott Babcock found guilty of approaching a North Pacific humpback whale at less than 100 metres

Feds urge Air Canada to fix booking problems as travel season approaches

The airline introduced the new reservation system more than three weeks ago

Most Read