And this time it’s not because of pipeline bottlenecks
However, WCS hasn’t only gotten cheaper in Alberta: it’s getting cheaper at the other end of the pipes — in Oklahoma and at the U.S. Gulf Coast as well — which reflects a broader quality-related headwind that we’re seeing across global crude differentials. This implied quality differential has widened from about US$4 per barrel to more than US$10 per barrel over recent months while the implied transportation differential has remained fairly steady at around US$7 per barrel.
This cycle was most acutely felt in October 2018 when the WCS differential widened to an unprecedented US$50 per barrel, which ultimately prompted the provincial government to temporarily curtail domestic production to reduce competition for takeaway capacity.So, what’s happening today? Given the still-fresh pain of the acute 2018 differential blowouts, a widening WCS differential harkens renewed pipeline worries.
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