Alberta sits on more cost-competitive oil than ever, but still can’t move it

Western Canada’s hydrocarbon sector is constrained in virtually every sense of the word.

It’s physically constrained. It has been well known for some time that the growing supply of Western Canadian oil and gas was on course to overtake the pipeline capacity capable of carrying it out of province. However, it became increasingly clear this year that crude-by-rail capacity has also lagged demand, stranding oil in Western Canada. The result: the value of Western Canadian crude oil has diminished, and with it the economic potential of Canada.

The price is constrained. In recent weeks, the price difference between Western Canadian heavy crude oil and the North American benchmark West Texas Intermediate (WTI) reached a whopping US$50 per barrel. It has since subsided but remains well above $40/bbl. At this point, the difference in price — or discount — is greater than the value of crude oil at the wellhead. To add some context, in 2017, the price difference between these two crudes was just over US$11/bbl…

 

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