Canada: Alberta crude oil on sale, but no deal on spreads - TDS

Analysts at TDS point out that Western Canada Select oil traded $26 below WTI last week, the biggest discount since December 2013 and they expect the WCS discount to narrow to $15 by 18Q1, but still remain wider than the 2016-17 average of $13.

Key Quotes

“We see the spread coming back under pressure to $20 in 2018Q2 because of new supply coming online. However we think higher WTI prices will offset the weaker spread.”

“The surge in the WCS-WTI discount is another blow to Alberta's economy and public finances, but we think the shock will be temporary. However, the lack of export capacity for Alberta oil is a significant hurdle to the industry.”

“Given our view on the WCS discount, we don’t expect much impact on ALTA financing costs for 2018. The broader Provincial space should continue to perform and support ALTA spreads in 2018.”