Canadian crude oil tumbles to $20 per barrel

My FX Forum

Staff member
A plunge in oil prices is a real nightmare for every oil producer. Canadian oil companies are having the worst of times, as they have to sell their products at rock-bottom prices. This nightmare has been continuing for two months in a row. In October Canada was selling crude oil at a price lower by 40-50 dollars than its neighbor, the United States. The cost of Canadian commodity took a nosedive to the level of 20 dollars per barrel.

In fact, Canadian oil has been always cheaper than WTI and Brent. Its quality is lower; therefore its price is also lower. However, such an enormous gap has never been seen before. Canada always sold its oil at a discount, but not so huge. The price gap has been expanding since the beginning of this year. The primary reason for a slump was disruption of supplies from Alberta where transportation problems arose. As a result, the demand for Canadian oil decreased. The price of Western Canada Select (WCS) declined, hitting the level of 30 dollars per barrel. In September the downward pressure ratcheted up.

Canada still has problems with pipelines. Moreover, the US refineries are undergoing maintenance-related turnarounds, so the demand declined significantly. Theoretically, there are several big projects in Canada, but in practice they face hurdles. Keystone XL, Trans Mountain Expansion, and Enbridge could transport oil from Alberta, but none of them will be launched in the nearest future.