Oil in Global Economy Series: Canada’s heavy oil discount attracts big buyer

Canada’s heavy oil, which is trading at heavy discounts to other global benchmarks such as the Brent or WTI, is finally attracting big buyers, who are eyeing lower cost on energy. Canada’s main benchmark crude index, Western Canada Select (WCS) is currently trading at $26.2 per barrel, which is almost $55 barrel per barrel discount to Brent and $45 per barrel discount to WTI.

China, which is the biggest importer of crude oil is now replacing Venezuelan crude with Canada’s sluggish heavy crude. According to data from cargo tracking and intelligence company Kpler, China purchased 1.58 million barrels of heavy Canadian crude oil for loading in September, up by nearly 50 percent compared to the 1.05 million barrels it imported from Canada in April. The increase coincided with a reduction of imports from Venezuela.

Cheap Canadian oil could help the Chinese refiners processing it to book better refining margins but increase pollution in a country where poisonous smog is a relatively regular affair. Analysts expect the demand of Canadian crude to remain high, going forward.