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Updated June 2021

Figure 1.4 shows both the historical and forecast price of Western Canadian Select (WCS).

Summary

The average price of WCS crude oil decreased by 39 per cent in 2020, to US$26.81 per barrel (bbl).

The base price of WCS is projected to increase to US$40.00/bbl in 2021, US$41.00/bbl in 2022, and US$55.00/bbl by 2030. Under the WCS low-price and high-price case, similar factors that have been captured in the West Texas Intermediate (WTI) forecast are expected to influence the forecast. The low-price case forecast for WCS is US$26.27/bbl for 2021, US$26.92/bbl for 2022, and US$36.12/bbl for 2030. The high-price case forecast is US$60.92/bbl for 2021, US$62.44/bbl for 2022, and US$83.76/bbl for 2030.

The WCS price is expected to follow WTI trend but remain lower due to quality differences and transportation costs.

In 2020

Price differentials: The WTI-WCS differential decreased slightly from US$12.71/bbl to US$12.43/bbl. However, monthly price averages showed large fluctuation, from as high as US$23.26/bbl in February to as low as US$4.34/bbl in June. The WTI-WCS differential shrank to less than US$10/bbl during the year, when over one million bbl/day (bbl/d) of oil sands production was cut due to the COVID-19 pandemic.

Production limits: Production limits were in place until November, at a limit of 3.81 million bbl/d. As of December, monthly oil production limits are no longer in effect.

Crude-by-rail:

The volume of crude oil moved by rail decreased by 39 per cent, from 102 million bbl/d in 2019 to 63 million bbl/d in 2020.

Forecast for 2021 to 2030

Price differentials and market access: In 2021, the price differential between WCS and WTI is projected to average US$13.00/bbl. Over the forecast period it is expected that factors that widen the differential (restart of some shut-in production from Alberta, competition on pipeline export capacity, and a larger global supply of crude oil) will exceed the factors that narrow the differential (less heavy oil output from Mexico and Venezuela). The differential between WCS and WTI is anticipated to gradually increase, reaching US$15.00/bbl by 2030.

Sulphur limits: The International Maritime Organization’s (IMO’s) sulphur regulations came into effect on January 1, 2020, imposing a lower sulphur limit for bunker fuels used in shipping from 3.5 per cent to 0.5 per cent. It was anticipated that the price of WCS would be impacted due to its relatively high sulphur content, but there was no significant change.

U.S. Gulf Coast demand: Imports of heavy oil from Venezuela and Mexico into the U.S. Gulf Coast are expected to continue to decrease. Alberta’s producers will continue to take advantage of strengthening demand for WCS crude from U.S. Gulf Coast refineries designed for heavy crude oil feedstock.

Low-Price and High-Price Cases

The low-price and high-price cases reflect near-term and long-term volatility of the price of WCS. Similar factors that have been captured in the WTI forecast, and factors impacting the differential WTI-WCS are expected to influence the low-price and high-price cases.

Low-price case:
  • Differential widens in absence of the Oil Production Limits Program that ended in 2020, due to increased production and limited takeaway capacity.
  • Production vastly exceeds storage and takeaway capacity.
High-price case
  • Capacity restrictions in both pipeline and rail are alleviated, which reduces differentials.
  • Alberta is able to increasingly compete internationally to realize higher prices.

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