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

RDCO removes Killiney Beach water quality advisory

Outdoor water restrictions are still in effect

Kelowna-based cannabis company granted licence for new facility

Tumbleweed is expected to produce 1,000 kilograms of marijuana

Parkinson Recreation Centre and gymnasium closures

The facilities will be closed for two weeks

B.C. Greens to celebrate accomplishments in Kelowna

BC Green Party passed their first ever bills this year

Motorcyclist involved in Westside Road crash

Air ambulance assists while motorists face lengthy delays

VIDEO: Canadian zoos’ captive breeding programs help preserve endangered species

Programs considered last-ditch effort to prevent local extinctions of turtles, butterflies and more

Unseasonable snow forces campers out of northeastern B.C. provincial park

Storm brought as much as 35 centimetres of snow to the Fort Nelson, Muncho Lake Park-Stone Mountain Park

Art and music at Summerland Ornamental Gardens

Second event of the summer will be held Sunday, Aug. 25

B.C. log export rules killing us, northwest harvester says

NorthPac Forestry says Skeena Sawmills has plenty of timber

Sleep expert recommends Summer snooze solutions

Summertime brings light, noise, heat and other conditions that can make getting to sleep hard.

Vancouver man arrested after pregnant woman’s SUV stolen, then crashed

Police are recommending charges against a 22-year-old Vancouver man

Environment groups warned saying climate change is real could be seen as partisan

Talk of climate change could be viewed as advocating against Maxime Bernier, the leader of the People’s Party of Canada

Search crews find 4-year-old boy who went missing near Mackenzie

George went missing early Saturday afternoon

Most Read