The discount of Western Canada Select (WCS) heavy crude to the North American benchmark West Texas Intermediate futures (WTI) narrowed again on Friday.

WCS for April delivery in Hardisty, Alberta, settled at $10.40 a barrel under WTI, according to brokerage CalRock, after having settled at $10.65 under the U.S. benchmark on Thursday.

The differential between Canadian heavy crude and WTI has been tightening since the beginning of March.

The differential tends to widen when oil prices are higher overall and narrow in lower price environments, said Al Salazar with Enverus Intelligence. That’s because high oil prices mean more demand for pipeline capacity, which means Canadian producers have to pay more to compete for transportation to U.S. refineries. “With lower oil prices in general, Canadian oil producers are not going to jack up production and cause a massive over-supply relative to takeaway capacity,” Salazar said.

Global oil prices have plummeted in recent weeks over concerns demand could exceed supply.

U.S. President Trump’s escalating trade war with other countries, including Canada, has roiled financial markets and raised recession fears.

Global oil prices rebounded by 1% on Friday to end the week nearly unchanged as investors weighed the diminishing prospects of a quick end to the Ukraine war that could bring back more Russian energy supplies to Western markets.
Source: Reuters