Crude: Western Canadian Select

Crude: Western Canadian Select

The ARGUS Western Canadian Select price assessments

Canada has become a leading supplier of heavy crude to the US Gulf coast, despite transport bottlenecks. The two most commonly traded Canadian heavy crude grades at the US Gulf coast, Western Canadian Select and Cold Lake, are similar in quality and typically trade within a 5¢/bl range of each other in the high-complexity refining centres of east Texas. Argus has responded to the industry’s growing need for a single price index by pooling trades for both grades to produce the Argus WCS Houston and Cushing price assessments.

Argus WCS Houston – The pipeline and terminal infrastructure in the Houston-Nederland-Beaumont area in Texas supports a price assessment that pools trades done at multiple terminals. This is because many pipeline tariffs allow for moving heavy Canadian crude to and from the major hubs at little or no cost. Accordingly, Argus pools spot trades for WCS and Cold Lake done at Enterprise’s ECHO, Sunoco’s (Energy Transfer Partners) Nederland and Phillips 66’s Beaumont terminals in a daily volume-weighted average to produce the Argus WCS Houston assessment.

It is also important to note that for months at a time, much of the WCS crude sold at the Gulf coast may be sold through term contracts. Since Argus assessments reflect only spot deals for delivery in the next month, the trade covered by these deals is not available to be included in the Argus WCS Houston assessment. That is why including the liquid spot trade of similar-quality Cold Lake at Houston-area terminals is so valuable to ensuring that the Argus WCS Houston assessment is based on robust physical spot trade every month.

Number of WCS Houston trades reported to Argus

  Feb 2019 Mar 2019 Apr 2019 May 2019 Jun 2019 Jul 2019 Aug 2019 Sep 2019
Cold Lake 21 11 15 28 36 49 34 70
WCS 4 3 8 8 1 2 4 11
Total trades 25 14 23 36 37 51 38 81

Argus WCS Cushing – The Argus WCS Houston assessment has seen the most rapid recent rise in liquidity, but trade of WCS Cushing (Oklahoma) is also highly active, and trades are widely reported to Argus. The Argus WCS Cushing assessment also considers Cold Lake trades and encompasses trades done at any major terminal in the Cushing area.

Number of WCS Cushing trades reported to Argus

  Feb 2019 Mar 2019 Apr 2019 May 2019 Jun 2019 Jul 2019 Aug 2019 Sep 2019
Cold Lake 8 11 15 24 25 28 13 27
WCS 35 21 21 19 29 28 27 22
Total trades 43 32 36 43 54 56 40 49

WCS Hardisty – The WCS blended stream is created in tanks at Hardisty and actively traded there. Argus began assessing spot trade of WCS at Hardisty in 2006.


Advantages of the ARGUS Western Canadian Select price assessments

Unlike most of the heavy crude sold into the Gulf coast — which typically arrives in cargo ships and is priced on government formulas — heavy Canadian crude at the Gulf coast regularly trades in smaller pipeline batches on a spot basis at multiple Houston-area terminals. Pooling this frequent, transparent trade gives multiple market-based price signals each day. This provides a robust price marker for all heavy crude at the Gulf coast.

Another benefit of an actively traded and transparent price for WCS at Houston is that it allows Argus to give a daily snapshot of the arbitrage between western Canada, Cushing and Houston (see graph below). These price spreads effectively communicate the strength of crude demand at each location, and help buyers and sellers determine where and when to trade.

Argus WCS assessments as differential to WTI Cushing


Users of the ARGUS Western Canadian Select price assessments

Anyone with exposure to heavy crude being shipped through or arriving at the US Gulf coast will find the Argus WCS price assessments beneficial. WCS Houston is also the only hedgeable heavy crude price in the US Gulf coast market, as Chicago-based exchange CME plans to launch a financial contract settled against the Argus WCS Houston physical assessment.

Oil barrels

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