Western Canadian Select stages a spectacular May rally
May turned out to be a good month for oil prices, climbing for the third month in a row. The May average for Western Canadian Select (WCS) was almost 30% higher than April, in both US and Canadian dollar terms. Canadian heavy oil prices have almost doubled from the lows of January.
4.40 ▲ 10.2%
5.67 ▲ 13.8%
7.54 ▲ 27.8%
10.19 ▲ 29.4%
The heavy oil discount declined from an average of US$14/bbl in April to US$12.20/bbl in May. About 1.2 million bbl/day was taken offline for most of May due to the Fort McMurray wildfires, which shaved approximately US$1/bbl off the differential between West Texas Intermediate and WCS. Some of that lost production has already started to come back online, although the differential seems to be holding steady for now.
The price difference between Brent and WTI also narrowed in May, coming much closer to parity. The Alberta wildfires have taken about 10% of North America's production offline, helping to boost the price of WTI. Declining production from US shale is also helping narrow the gap.