25.10.201817:39 Forex Analysis & Reviews: The cost of Canadian oil collapsed to a shocking $ 20 a barrel

According to experts, the collapse in the Canadian oil market, which began in late September 2018, continued this month. At the moment, Canadian oil producers sell black gold at $ 40-50 per barrel less than their counterparts from the United States.

Experts remind that, although Canadian oil is usually traded at a discount to the American WTI, the price gap has reached unprecedented levels. For the first time, hints of price discrepancy declared themselves at the beginning of this year, when there were problems with transportation through pipelines from the Canadian Alberta field. As a result, the demand for black gold from Canada has steadily declined.

The cost of Canadian oil Western Canada Select (WCS) gradually fell, the discount reached $ 30. This problem was exacerbated in September, when preventive work at the refineries and their modernization began in the United States. As a result, the demand for black gold has collapsed. At the same time, Canadian oil producers were faced with the currently unsolvable issue of infrastructure constraints. They faced the problem of storing about 225-275 thousand barrels per day.

Another problem for Canadian oil companies is the transportation of black gold to the United States. Difficulties with the use of pipelines are forcing Canadian oil producers to transport oil to the United States by rail. As a result, the volume of deliveries by this type of transport reached a record of 204 thousand barrels per day. However, this is the most expensive type of transportation, experts emphasize. Recall that after the collapse in oil prices in 2014, transportation of raw materials by rail became unprofitable, and transport companies switched to other goods.

According to analysts, another reason for the fall in prices for WCS is also the lack of an alternative pipeline in Canada. However, there are several major pipeline projects, including Keystone XL, Trans Mountain Expansion and Enbridge. According to experts, each of them could send oil from Alberta, but in the near future, they will not work.

Currently, WCS oil prices have fallen to $ 20 a barrel, that is, the discount to WTI American oil has reached a record $ 50. According to experts, this price gap looks terrifying. According to experts, Alberta's oil industry is losing about $ 100 million every day.