I was asked about this during a talk yesterday in Calgary, and my first thought was "why hasn't Rory had an chart about this in the last 24 hours?" Well, here we are. Look at the middle chart and the value of WCS *at Houston* before you start blaming pipeline capacity.
🇨🇦🛢️😱 Western Canadian Select crude differentials continue to get crushed, now $31/bbl below WTI in Hardisty, Alberta.
That's tied for the widest spread in late-2022, and before that the late-2018 diff blowout that forced production curtailment in early 2019.
But this time it isn't pipeline capacity shortages—the transportation proxy (far right chart) is completely line.
This rout is being entirely driven by the diff at Houston, now at an all-time high of >$23/bbl.
That normally means an issue with light-heavy quality, which is partly to blame here. But this time it's much more driven by our record-high tanker rate environment.
Canadian heavy crude *re*exports out of the US Gulf Coast have historically gone as far as India, which is an exceptionally expensive trip (~10x normal) atm.
Combine that with additional Venezuelan crude availability this year and you need to heavily discount your barrel to get someone to bite, and it's this small pool of marginal barrels that are dragging down the entire Western Canadian pricing complex.
The brutal irony is that just at the moment Canada is finally diversifying exports to Asia that the long trip to Asia becomes a serious pricing vulnerability in this spiked tanker market.
Tanker rates have also widened the spread between WTI and Brent, so WCS gets the double-whammy of the compounding diffs.