Sell cost-per-barrel, not growth, as Alberta heavy oil loses US$28 a barrel at the border

What’s happened.

Western Canadian Select, the heavy oil blend that Alberta and the oil sands ship to the United States, traded on Wednesday at US$28 a barrel below West Texas Intermediate, the North American benchmark price. That gap, known as the differential, is about US$15 wider than it was a year ago, even though West Texas Intermediate itself sat near US$98 a barrel. The Globe and Mail reports two reasons: oil sands production is surging while the Trans Mountain pipeline to the West Coast runs at capacity, and Venezuelan crude has come back into the US market far faster than expected, rising from 125,000 barrels a day at the start of the year to an average of 600,000 barrels a day this month, according to Rystad Energy. A separate report put the discount at US$26.40 a barrel earlier in the week.

For context, the discount hit roughly US$43 a barrel in October 2018, then narrowed to about US$13 on average after the Trans Mountain Expansion Project was finished in 2024. TD Cowen analyst Menno Hulshof says the recent widening has been “a surprising negative” for Canadian producers, and his bank has raised its forecast for the average gap to US$15.50 in 2026, US$17 in 2027 and US$16 in 2028. In other words, the market has stopped arguing about whether the wider discount is temporary. Ninety per cent of Canada’s oil exports still go to one customer, the United States, which is why analysts point to the proposed Pacific Link pipeline to the West Coast, designated by Ottawa early this month as a project of national interest.

The other half of the picture is that producers are not in trouble. Rystad’s Susan Bell says they are “still making a ton of money on the crude oil,” and Scotiabank’s Robert Hope expects third-quarter results slightly ahead of expectations, pointing to liquefied natural gas exports, data centre power demand, electrification and production growth driving “larger capital programs and an expanding project sanctioning cycle.” So budgets are growing while every barrel earns US$28 less than the headline price suggests.