Western Canadian Select historical pricing
West Texas Intermediate (WTI) and North Sea Brent are the two most commonly reported crude streams. Brent is the international seaborne crude benchmark, which can be freely transported around the world without constraint. West Texas Intermediate is the US produced benchmark crude and cannot be exported outside of North America; WTI therefore sells at a small discount to Brent, currently about $4 per barrel. All upgraded Canadian crude oil sells at prices close to West Texas Intermediate.
However, a good portion of bitumen from the Canadian oil sands is not upgraded and sold to market as Western Canadian Select (WCS), which is a blend of bitumen, diluted with light condensate. Western Canadian Select trades a discount to WTI, this difference is referred to as the Heavy Oil Discount, currently at $17.40 per barrel.
For the past 10 years, the price of WCS has varied from as much as $115 per barrel in the summer of 2008 to a low of $23 per barrel reached by December 2008. That sharp drop occurred during the financial market collapse of 2008.
The drop in crude prices this year has been far less dramatic than 2008, although it is very likely we have not yet reached the lows in this decline. While West Texas Intermediate is down 45% from the highs of mid-2013, Western Canadian Select has fallen more sharply, so far down 55% from the peak of over $90 per barrel reached in the summer of 2013. Today's closing price for WCS is $40.40 per barrel, the lowest since the spring of 2009.
Traditionally, when the price of crude oil is low, the heavy oil discount is relatively narrow. However, the price differential to WTI has been widening going into the winter months. The heavy oil discount so far for the month of December has averaged $18 per barrel, representing a 32% discount to WTI. This reflects the oversupply in the North American market and more importantly, the lack of port access for Canadian crude oil.
It is worthwhile to note the integrated energy majors in Canada upgrade and refine a significant portion of their oil and are less leveraged to the price of WTI or WCS. This includes Suncor, Husky and Imperial Oil. Operators such as Syncrude upgrade their bitumen product to light, sweet crude, and get prices close to or better than West Texas Intermediate. Companies like Cenovus and MEG Energy lack upgrading facilities and are far more leverages to the price of Western Canadian Select. Players such as Canadian Natural Resources upgrade a portion of their product, and produce a mix of different crude product streams. In theory, the more integrated companies should be less impacted by falling commodity prices. However, as a general rule, as crude oil prices decline, energy stocks decline in tandem, regardless of what product they sell to market.