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Western Canadian Select up 828 per cent

Western Canadian Select up 828 per cent

Posted on: 5/14/2019 | Author: ATB Financial's Economics + Research Team

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Imagine if the average price of a new car went from $41,230 in October to $5,740 in December and then back up to $53,250 in April. The auto sector would be sent reeling.

This is essentially what happened to the price of Western Canadian Select (WCS) crude. Transportation bottlenecks and U.S. refinery outages caused the average monthly price of WCS to collapse at the end of last year, falling from $41.23 a barrel in October to just $5.74 in December (all prices in U.S. dollars).

Production curtailments imposed by the province helped prices recover. WCS averaged $53.25 in April, an increase of 828 per cent compared to December’s $5.74.

The difference between a barrel of West Texas Intermediate crude and WCS went from an average of $45.48 in November to just $10.64 in April.

Even with the improvement in the price of WCS, the hangover from the price plunge and the lack of pipeline capacity that helped bring it on has depressed drilling activity. At the same time, the differential of just $10 has thrown a wrench into the economics of transporting bitumen by rail.

The speed and magnitude of these fluctuations stand out, but large swings in the price of our main export are par for the economic course in Alberta. (The natural gas sector also experiences this.) While often challenging, it points to the incredible resilience and adaptability of the businesses that form Alberta’s oil gas industry.

 

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