WCS crude price differentials tighten as wildfires disrupt Canadian crude production

Canadian heavy crude price discounts tightened on June 2 as wildfires sweeping across northern Canada caused producers to shut in nearly 350,000 b/d of output.

Western Canadian Select at Hardisty, Alberta, was traded at an $8.50/b discount to WTI early June 2, narrowing from an $8.70/b discount assessed by Platts on May 30 and a $9.75/b discount on May 26.

Platts is a unit of S&P Global Commodity Insights.

Discounts widened later in the day with trading seen at $8.85/b under WTI.

Over the past several days, major producers have been forced to evacuate workers and temporarily shut in output as fires advanced toward key oil sands infrastructure.

Cenovus said June 1 that the wildfires reduced output from its Christina Lake asset.

"As a precaution, currently only essential personnel are at the Christina Lake oil sands asset, where the company began safely and methodically shutting in production on May 29," the company said in a press release. "Approximately 238,000 barrels per day of production have been impacted, and the company will provide an update when it is in a position to restart."

MEG Energy is delaying the restart of 70,000 b/d of production, and Canadian Natural is shutting 36,500 b/d of bitumen output, the companies said May 31.

On May 26, a separate wildfire caused Aspenleaf Energy to halt operations, shutting roughly 4,000 boe/d in Alberta's Swan Hills region.

The wildfires in Alberta have been particularly active this spring, with emergency services battling multiple blazes across the province's forested regions where many oil sands operations are located.

"The nature of wildfires means that if winds move east, much more crude production would be at risk, pushing an already strong WCS differential higher," Commodity Insights analysts James Bambino and Richard Joswick said in a report. "Seasonal production maintenance has been a driver of recent strength, but lower volumes from Mexico and Venezuela to the US Gulf Coast have also limited heavy sour supply."

US Gulf Coast refiners will likely need to source more heavy crude from Canada as US sanctions cut flows from Venezuela, while imports from Mexico will tighten as that country's refinery capacity increases.

Chevron's exit from Venezuela, triggered by stronger US sanctions, is expected to pull up to 200,000 b/d of heavy crude from the USGC.

While wildfires in 2024 had little impact on Canadian production, wildfires brought down roughly 385,000 b/d of output in May 2023 and 400,000 b/d in 2016, the analysts said.

Western Canadian crude oil production is expected to reach record highs of 5.4 million b/d in 2025 and 5.6 million b/d in 2026, according to Commodity Insights.