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

Bachrach nominated by NDP for federal election

The Smithers mayor won on the first ballot with 446 of 797 votes

Fire ban back in effect for Northwest Fire Centre region

Starting May 24, both Category 2 and Category 3 prohibitions will be in place

Kelowna company wins contract for LNG Canada project in Kitimat

SK Form & Finish will work with equivalent of 4,000 fully loaded concrete trucks

U.S. tariffs on Canadian aluminium scrapped

Joint effort by industry, government and unions secures deal

VIDEO: Protesters in Penticton gather to rally against sleeping-on-sidewalk bylaw

The proposed bylaw would outlaw sitting or lying on the city’s downtown sidewalks

Raptors beat Bucks 100-94 to advance to franchise’s first-ever NBA Finals

Leonard has 27 points, 17 boards to lead Toronto past Milwaukee

Third person charged in death of B.C. teen Bhavkiran Dhesi

Inderdeep Kaur Deo facing charge of accessory after the fact to murder

Kamloops girl, 9, recovering from carbon monoxide poisoning now out of ICU

Her mother who was sleeping in the same tent with her did not survive

‘I think he’s still alive’: B.C. mom pleads for help finding son last seen a month ago

Family offering $5,000 reward for information leading to the safe return of Tim Delahaye

New poll suggests one-third don’t want politicians to wear religious symbols

Local politicians shouldn’t be allowed to wear hijabs, crucifixes or turbans on the job, survey suggests

Raptors fans far from home adjust plans to watch pivotal playoff game

Raptors currently lead the playoff series 3-2, and a win Saturday would vault them into NBA finals

PHOTOS: First responders in Fernie rescue baby owl who fell from nest

The baby owl’s inability to fly back to its nest prompted a rescue by first responders

Five takeaways from the Court of Appeal ruling on B.C.’s pipeline law

It’s unclear how many tools are left in B.C.’s toolbox to fight the project

Most Read