Brent crude oil for delivery in December rose by 3.33% to $109.50 per barrel. Meanwhile, the price of West Texas Intermediate (WTI) crude oil also increased by 3.41% to $101.30 per barrel. This is the first time in the past month that the price of this American benchmark has exceeded $100 per barrel.
Sharp Decline in Canadian Oil Prices
Despite rising global prices, Canadian oil has sharply retreated against major oil price benchmarks. The price of Western Canadian Select (WCS) for delivery in November in Hardisty, Alberta, fell to $26.40 per barrel below the WTI price. This discount increased to $25.55 on Wednesday and is clearly rising compared to about $10 in mid-September. The current discount has increased by more than $15 per barrel compared to last year.
Read more: The Empty Status of Iran's Oil Terminals Continues
Reasons for the Retreat in Canadian Oil Prices
One of the main reasons for this discount is the heaviness and high density of Alberta oil, which makes its refining costs higher than lighter and sweeter Texas oil. Additionally, the geographical distance between Hardisty and major oil refining markets on the Gulf Coast of the United States can alone lead to price reductions. Hardisty is nearly 4,000 kilometers away from these markets.
Currently, Canadian producers are forced to either accept lower prices or turn to more expensive rail transport, especially when pipeline capacity is limited. However, this time, the current crisis for Alberta producers is more related to how Gulf Coast buyers assess heavy and dense oil rather than the exit of oil from the province.
Moreover, drone and missile attacks in Ukraine have severely damaged Russia's oil refining capacity, leading to domestic fuel shortages and pushing global diesel prices to their highest levels. This situation causes global refineries to lean more towards lighter and sweeter oils, as these produce more diesel per barrel and reduce the attractiveness of Alberta's heavy oil.
Additionally, ongoing geopolitical conflicts have disrupted the global shipping industry and increased shipping rates. Currently, shipping rates for Very Large Crude Carriers (VLCC) have reached a historic high of $805,000 per day in October, nearly 15 times higher than the average rates in recent years.
Another issue is the increasing competition from Venezuelan oil. With rising imports of Venezuelan heavy oil to the Gulf Coast, refineries that were previously built to process high-density Canadian heavy oil have found an alternative source. Meanwhile, the price of Venezuelan oil is higher than WCS, and this new flow of heavy oil to the Gulf Coast reduces the pricing power of Canadian producers.
Finally, the expansion of the Trans Mountain pipeline in Canada, which had previously helped alleviate export bottlenecks, has now reached its maximum capacity and has put producers under constraints in moving additional heavy oil. This pipeline has a capacity of 890,000 barrels per day and reached its maximum capacity in June 2026. It is expected that Canadian oil production will exceed the record of 5.3 million barrels per day this year.
Ultimately, it does not seem that the situation for Canadian producers will improve soon. New forecasts for global oil prices have risen due to ongoing geopolitical risks in the Middle East. However, it is expected that large WCS discounts will continue into 2027 due to pipeline constraints and increased competitive heavy oil imports to the Gulf Coast.
Read more: Iran's Continental Shelf Oil Company Signs $1 Billion Contract for Offshore Drilling Services for 4 Rigs · The Cost of Transporting U.S. Crude Oil to Japan Reached $81 Million
