Canadian heavy oil falls as Alberta crude-by-rail deal nears

By Robert Tuttle and Sheela Tobben on 10/8/2019

CALGARY and NEW YORK (Bloomberg) -- Canadian heavy oil prices have weakened ahead of an anticipated announcement that Alberta will ease production limits in exchange for shipping more crude by rail.

Western Canadian Select’s discount for November to futures widened $1.30/bbl to $15.75 Monday, for the biggest differential since May, data compiled by Bloomberg show. The spread reached $15.50/bbl earlier in the day, according to Net Energy Exchange.

Alberta’s government is preparing to announce the sale of crude-by-rail contracts later this month. As part of the sale, Alberta Premier Jason Kenney has said oil producers will probably be allowed to exceed their provincially imposed output caps if they can ship those extra barrels by train.

“There is a big motivation to increase rail use,” Tim Pickering, founder and chief investment officer of Auspice Capital Advisors in Calgary. “It’s underused.”

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