Canadian crude prices have fallen further against the February CMA Nymex, especially in US markets, as Venezuelan heavy sour crude moving under US control is poised to add to already ample near-term heavy sour supplies.
Western Canadian Select (WCS) in the Houston and Cushing markets saw deep drops of $2.50-$3.50/bl earlier today from the prior session relative to the basis, followed by narrower discounts that were still at the widest since July 2024.
This follows news that US president Donald Trump's administration is planning to taking over oil sales from Venezuelan state-owned oil company PdV "indefinitely". The US plans to partially lifts sanctions on the Venezuelan oil sector, but deposit sales proceeds in US-controlled bank accounts, the US Department of Energy (DOE) said. Initially, the US will take possession of an estimated 30mn-60mn bl of crude held in floating storage or onshore Venezuelan storage.
Heavy sour Canadian Cold Lake at the Texas Gulf coast traded at $7.50-$9.60/bl discounts to the basis earlier in the day Wednesday after moving to a $6.60/bl volume-weighted average discount on Tuesday. In US markets, Cold Lake and Canadian heavy benchmark WCS trade at parity. In Cushing, the low-TAN heavy sour has traded at $8.50-$10/bl discounts to CMA Nymex.
In Hardisty, Alberta, WCS was heard Wednesday widening its discount by 35¢/bl from the prior session to $14.35/bl. Discounts for all three locations were already $1.20-$1.85/bl wider than a month earlier as values face pressure because of rising heavy sour supply and slower export demand. The US refinery turnaround season in the first quarter further undermines buying interest.
Recent developments suggest more Venezuelan heavy crude could flow to the US Gulf coast refinery region, which hosts complex refineries with many built originally to run heavy Latin American crude. But the development of Canadian heavy oils sands has led to high imports from the US' northern neighbor, with which increased Venezuelan oil flows would compete
Earlier this week, Phillips 66 said it could process about 200,000 b/d of Venezuelan crude at its two large Gulf coast refineries if available and supported by price economics.
Venezuela's crude output was 934,000 b/d in November, according to an average of Opec secondary sources including Argus. Increasing Venezuelan production significantly would likely take many years given long-term underinvestment and neglect. But in the short-term flows could be redirected from Chinese independent refiners to other markets with the partial lifting of US oil sanctions.
