Calgary oil brokerage Net Energy said the difference between Western Canadian Select (WCS) bitumen-blend heavy oil and New York-traded West Texas Intermediate (WTI) oil prices was about $12.50 US per barrel on Wednesday afternoon, according to CBC Canada.
This a lot better than the US$17.52 per barrel average for spot contracts for January delivery signed last month. In October, the WCS-WTI discount peaked at over $52.00 a barrel, a figure that Alberta Premier Rachel Notley said was costing the Canadian economy more than $80 million per day.
Traditional norms in the discount did not return until Notley announced on December 2 the province would impose curtailments of 325,000 barrels per day as of Jan. 1 on larger producers to relieve the surplus in storage and relieve the pipeline glut.
This program should remain in effect for three months, then it will be lowered to 95,000 barrels a day for the rest of 2019. Government spokesman Matt Dykstra confirmed in an email on Wednesday to the Financial Post that a total of 25 companies that each produce more than 10,000 barrels of oil per day in Alberta have been asked to cut production.
“Government will be watching the way the industry responds, including the amount of storage being drawn down and the amount of oil nominated and apportioned on Enbridge (export pipelines) to help understand when and if the curtailment levels should be adjusted,” Dykstra said.
Most oil sands producers are feeling positive about the cutbacks and the rising price of their crude oil. Tom McMillan, a spokesman for oilsands producer Pengrowth Energy Corp says his company has been complying with the cutbacks and the better prices have helped.
He also notes that the province has been “responsive” in addressing his company’s concerns — however, he still hopes the production cuts will end soon.
PrairieSky Royalty Ltd. CEO Andrew Phillips says they have also benefitted from the higher prices. His company produces less than 10,000 barrels a day, so doesn’t have to curtail production.
“Four Fridays ago, at the bottom, we had bitumen effectively trading at US$6 a barrel — we had WCS in the low teens,” he said. “And WCS two Fridays later, after the announcement of the curtailments, was at US$40.”
According to OilPrice.com,. WTI crude is trading at $46.66.
