Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

An oil sands site in Alberta, Canada. The Canadian heavy crude market is benefiting from both rising U.S. benchmark oil prices as well as unexpectedly narrow discounts to lighter-grade oil.

A second straight week of dwindling U.S. crude inventories propelled oil prices to their highest in 16 months, pushing Canadian heavy crude prices to levels that are nearly double those seen when the government of Alberta warned of a $6-billion shortfall in energy revenue.

The Canadian heavy crude market is benefiting from both rising U.S. benchmark oil prices as well as unexpectedly narrow discounts to lighter-grade oil. That spread is now around $16 a barrel, compared with a $40 gap last January when fears about insufficient pipeline capacity weighed on producers.

A combination of rising U.S. oil demand and widening options for moving crude around the continent, including rail shipments, have lifted both benchmarks and eased fears of a "bitumen bubble" that Alberta Premier Alison Redford warned about in January. The province derives about a third of its overall revenue from the energy industry and it blamed deeply discounted oil sands-derived crude for its sixth-straight deficit budget in March.

Story continues below advertisement

The bitumen bump comes as Alberta faces major expenditures to deal with recovery after flooding ravaged large parts of Calgary and other towns in the province last month.

U.S. benchmark West Texas Intermediate rose $2.99 (U.S.) on Wednesday to settle at $106.52 a barrel, its highest since March 2011, after the U.S. Energy Information Administration reported domestic crude inventories had fallen by about 10 million barrels for the second consecutive week.

Western Canada Select, the frequently quoted domestic heavy oil grade, sold for $16.30 a barrel under WTI for August delivery, pushing its absolute price above $90 a barrel. That compares with lows of around $50 a barrel early this year, before a combination of delayed production at Imperial Oil Ltd.'s Kearl oil sands project in northern Alberta, which is still operating at less than half its 110,000 barrel-a-day capacity, and a big increase in shipments of crude by train began to buoy prices.

Alberta had assumed a heavy crude price of $68.21 a barrel in its 2013-14 budget. The government said it is too early to say if the jump will be sustained. It will release its first-quarter update at the end of August, and will revise its oil price forecast, and expectations for heavy crude spreads, then.

"If it is maintained and if it looks like it is a trend as opposed to just volatility, then we will revise our forecasts potentially upwards," Chris Bourdeau, spokesman for Alberta Finance, said.

North American refineries have ended spring maintenance outages and the U.S. economy has shown signs of improvement, increasing demand amid declining inventories, said Chip York, analyst at Wood Mackenzie in Houston.

"The U.S. economy, from an energy consumption standpoint, seems to be a bit stronger than people expected," he said. "Where we've seen oil demand decline in the past three or four years, we're now starting to see a bit of a levelling off and some upward ticks in volumetric growth."

Story continues below advertisement

Demand has also been bolstered by a need for crude to fill new pipelines, including TransCanada Corp.'s Gulf Coast project, which is the southern portion of the Keystone XL proposal under construction between Oklahoma and Texas. It will require so-called "line fill" later this year, Mr. York said.

The floods which swept southern Alberta last month are putting pressure on the Redford government's coffers. It has already approved $1-billion as immediate flood support for families and communities, and more will follow.

With reports from Carrie Tait and Reuters

Editor's note: Analyst Chip York's name has been corrected in the online version of this story.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies