Vipal Monga and David George-Cosh of the Wall Street Journal do a nice job explaining regional differences in pricing of two different crude streams, WTI and West Canadian Select, here…
“Oil producers such as Imperial Oil Ltd. IMO -0.63% , Suncor Energy Inc. SU -0.21% and Cenovus Energy Inc. CVE -1.63% have few avenues to ship their oil to the U.S., their primary market. The pipelines that normally take the crude are almost at capacity, which leaves railroads as the only option for larger shipments.
But Canada’s largest railway companies, Canadian Pacific Railway Ltd. CP -0.19% and Canadian National Railway Co. , in recent weeks have signaled that they are in no rush to take the oil. They fear oil companies will fill their cars with shorter-term contracts now but shift quickly to pipelines when new capacity becomes available in a few years.”
“Western Canadian Select blend trades at a discount to the North American benchmark West Texas Intermediate because it is more difficult and more expensive for Canadian oil producers to ship their oil from wells to U.S. refineries, and those costs come off the price. The pipelines that normally pump the oil from Western Canada are almost full.
Compounding the issue: TransCanada Corp.’s Keystone pipeline, one of the major arteries taking the oil to the U.S. Gulf Coast, is running at only 80% capacity after suffering a leak late last year in South Dakota.“
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