Heavy oil differential narrows slightly

The discount on Western Canada Select (WCS) heavy crude versus the North American benchmark West Texas Intermediate (WTI) tightened on Friday:

WCS for May delivery in Hardisty, Alberta, settled at $13.45 a barrel below WTI, according to brokerage CalRock, after closing at $13.60 a barrel below the benchmark on Thursday.

Canadian heavy crude differentials have strengthened this month on news that the 600,000 barrel-per-day Trans Mountain pipeline expansion project is set to start operating on May 1.

“We expect the start-up of TMX should eliminate apportionment on the pipeline systems and lead to refiners competing to buy heavy oil,” BMO Capital Markets analyst Randy Ollenberger said in a note to clients.

BMO said the differential could fall below $10 a barrel, helped by the ramp up of the Pemex Dos Bocas refinery in Mexico boosting demand.

Oil rose around 1% on geopolitical tensions in the Middle East but posted a weekly loss on a bearish world oil demand growth forecast from the International Energy Agency (IEA) and worries about slower U.S. interest rate cuts.
Source: Reuters (Reporting by Nia Williams in British Columbia)