Canadian heavy oil price falls, selling at largest discount in 18-months

Canadian heavy oil prices are plunging this week following the upheaval in Venezuela over the weekend and the prospect of more Venezuelan oil imports to the United States.

A barrel of heavy oil from Western Canada is now selling at the widest discount compared to benchmark prices in North America since July 2024.

Western Canada Select (WCS) traded for $14.45 a barrel below the value of an oil blend known as West Texas Intermediate (WTI), the North American benchmark.

Heavy oil prices have faced much wider discounts over the last decade, but the widening gap this week comes as the U.S. intervenes in Venezuela, including taking control of tankers and a pledge by the Trump administration to ramp up oil production in the country in 18 months.

On Tuesday, President Donald Trump announced a deal in which Venezuela would provide up to 50 million barrels of oil to the U.S.  

Venezuela and Canada mainly produce a similar blend of heavy oil.

The competition between the two countries would largely surround refineries in the U.S. Gulf Coast. That's the destination for about 10 per cent of Canada’s total oil exports, or about 350 thousand barrels per day, according to a recent analysis from the Servus Credit Union. 

“It doesn't take much in additional production from Venezuela finding its way to the U.S. Gulf Coast to have an impact on prices,” said Mark Parsons, chief economist at ATB Financial, in an interview. “That’s what we’re seeing now.”

In the long term, though, Parsons said it would take several years and billions of dollars in investment to ramp up Venezuelan oil production anywhere close to where it used to be. 

“We don't see this as being a major threat yet, but it's something to watch very closely.”

Venezuelan oil production peaked in 1970 at about 3.7 million barrels per day. Since then, various sanctions and failed government policies drove down investment, and output averaged only around 900,000 barrels per day last year.