A surging differential for Western Canada’s benchmark heavy crude has traders and analysts wondering if predictions that tighter sulfur requirements for marine fuel next year will devalue the country’s oil assets are overblown. “Nobody is talking about IMO 2020 anymore,” one trading director at an investment bank in Calgary said. Market participants say a lot has changed since early forecasts suggested the International Maritime Organization’s rule limiting fuels to 0.5% sulfur from the current 3.5% would significantly devalue the Western Canadian Select blend due to its high sulfur content. “It’s hard to completely write it off,” Matt Murphy, an analyst at investment bank Tudor, Pickering, Holt, said of IMO 2020’s impact to WCS. “But the medium and heavy sour market is so different than it was. The risk is much lower.” The collapse in Venezuelan exports, US sanctions on Iran and surging Canadian exports to the US are among the factors that have buoyed the grade this year. The differential of WCS to the front-month NYMEX light sweet crude futures contract ballooned to minus $51.50/b on October 11. But in December, Alberta’s government said it would cap production, which eventually tightened the differential to minus $6.95/b on January… continue reading
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Source: CTRM Center