Demand rising for Canadian oil

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Canada’s heavy oil outshines WTI benchmark

Deborah JaremkoDemand for oil from Canada is rising as world oil consumption hits new records.

Heavy, sour oil grades like those Canada primarily exports are experiencing what one analyst calls a “price renaissance,” outperforming the U.S. light, sweet oil benchmark West Texas Intermediate (WTI).

“Heavy is the crude that wears the crown,” Toronto-based Rory Johnston, founder of Commodity Context, wrote recently.

“While the most commonly referenced light sweet crudes are on an uninspiring price run, heavier crudes are actually having a pretty great year. As just one example, the price of Western Canadian Select (WCS), a heavy sour crude that represents Canada’s main crude export blend, is up a whopping $15 per barrel (about 20 percent) year-to-date.”

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That’s compared to an increase of about US$5 per barrel for WTI this year.

There are several reasons for the higher Canadian heavy oil prices, says Phil Skolnick, New York-based oil market analyst with Eight Capital.

Maintenance at oil sands projects has reduced available supply while, at the same time, demand has increased. The new Dos Bocas refinery in Mexico is drawing heavy oil away from refineries on the U.S. Gulf Coast, and petrochemical plants in China are ramping up production using heavy oil from both Canada and Latin America, Skolnick says.

Additional demand is expected when the U.S. government purchases sour crude to refill its Strategic Petroleum Reserve.

“Demand is increasing for sure,” he says.

Canada’s oil exports to customers outside of the United States reached a record 291,000 barrels per day this spring, according to the Canada Energy Regulator.

Meanwhile, American oil imports from Canada remain steady at above 4.5 million barrels per day, according to the U.S. Energy Information Administration.

Even though it’s not a global benchmark like WTI, the improved pricing for heavy crudes like WCS is important because it has “a material impact” on the earnings of producing companies and nations, Johnston wrote.

Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil would add $6 billion to Canada’s economy over the course of one year. 

With the Trans Mountain pipeline expansion now more than 80 percent complete, Canada is closer to expanding its ability to supply growing oil demand in global markets, with the benefits flowing to Canadians.

Deborah Jaremko is director of content for the Canadian Energy Centre, a Troy Media Editorial Content Provider Partner.

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The opinions expressed by our columnists and contributors are theirs alone and do not inherently or expressly reflect the views of our publication.

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Troy Media is an editorial content provider to media outlets and its own hosted community news outlets across Canada.

By Deborah Jaremko

Deborah Jaremko leads content development for the Canadian Energy Centre, an independent provincial corporation that is primarily supported by the Government of Alberta’s industry-funded Technology, Innovation and Emissions Reduction (TIER) fund. Deborah is the former editor of and oilsands editor for the Daily Oil Bulletin. She was editor of Oilsands Review magazine from its founding in 2006 to its close in 2017.

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