Canadian oil spread narrows dramatically
Alberta's government on Sunday announced a 325,000 barrel per day production cut due to massive bottlenecks in pipelines heading to the United States. That will lower production by 8.7%. After three months, production will be cut by 95k bpd through 2019.
The effect has been immediate with the spread on Western Canada Select narrowing to $21 from $29 on Friday. In October it had been as wide as $52. With WTI also climbing $2.18 today, it's a dramatic move.
Effectively, WCS is trading today at $32.11 compared to $21.92 on Friday -- that's a nearly 50% jump in one day.
The bounce helps to explain the Canadian dollar strength today. One reason that's it's tempered is that cutting 325K bpd of production will temper overall exports even if the per-barrel price is higher.
The good news for the Canadian dollar will come in 2020 when storage is cleared out and (hopefully) pipelines are finally up and running. That will keep the discount narrow and add back that production.
