Brent is trading above $100 a barrel, near $106 this morning, with WTI in the mid-$90s. Yet Western Canadian Select (WCS) settled about $25 below WTI last week, and that discount has widened by roughly $8 since early September. Click here to listen to the full interview.
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The Discount Is Widening While Global Prices Rally
Higher global crude should be lifting Canadian producers, and some of it is. WCS, the main benchmark for Canadian heavy crude, has moved the other way, widening by roughly $8 since early September even as Brent and WTI climbed on the U.S.-Iran war. The stakes for Alberta are large: every $1 change in WCS moves Alberta royalty revenue by about C$700 million.
WCS is what Alberta producers actually receive, which makes the discount a provincial revenue story as well as a market story. Canada produced about 4.3 million barrels per day in 2025. Roughly 3.8 million barrels per day went to the U.S., mostly to the Midwest, with about half a million barrels per day reaching the Gulf Coast.
Freight Costs Are Trapping Barrels on the Gulf Coast
Refinery outages are the first driver. When refiners run less, demand for Canadian heavy barrels falls and the discount widens. The bigger issue is freight. Very large crude carriers that moved crude to Asia for less than $10 a barrel before the war now cost $30-$40, as conflict-related disruptions and longer voyages around the Cape of Good Hope have tightened global tanker availability. Our earlier work on the Strait of Hormuz standoff and Canadian energy laid out this supply-risk backdrop.
The result is excess supply in the Gulf Coast. Canadian crude that would normally be re-exported to Asia is staying in the region because shipping is too expensive. The export question hinges on Alberta’s West Coast pipeline options and the China wild card, which will shape where Canadian barrels can find buyers.
Refinery Outages Are Tightening Product Markets
Gasoline and diesel prices have been volatile, and refinery disruptions are at the center of it. Product outages push prices higher, tempering demand until supply rebalances. We are bullish on gasoline and diesel while the war continues. Our diesel analysis sets out the mechanism: refining constraints, not crude supply alone, are driving prices at the pump.
The same refinery constraints that weaken demand for Canadian heavy crude are tightening product markets, so the two dynamics are linked. Refinery restarts should help narrow the WCS discount. Shipping costs, however, will not normalize until the conflict ends or new tonnage is built, which could take years.
Our Price Scenarios and What To Watch
Our base case calls for Brent to average $100 through 2026 and 2027. Forward Brent has moved to about $93-$94, so the market is still below our call. The range of outcomes is wide: the lowest call for Brent next year sits in the high $60s to low $70s, while the highest reaches $120.
Our team watches inventory levels in U.S. and Western markets, because those stocks anchor the benchmark prices. Strait flow volumes matter less if they do not change those stocks. Physical markets can run well ahead of screen prices, as our analysis of why screen prices lag the real crisis in physical markets shows.
Top Three Takeaways:
1: Why is Canadian heavy crude trading at a wider discount when global oil prices are rising?
Refinery outages are reducing demand for Canadian heavy barrels and freight costs have surged. Shipping to Asia now costs $30-$40 per barrel, up from about $3, keeping Canadian crude on the Gulf Coast and creating a glut.
2: What is preventing the discount from closing quickly?
Shipping capacity is constrained while the Strait of Hormuz remains closed and vessels sail longer routes around the Cape of Good Hope, reducing effective tanker capacity by about 30%. We believe freight rates will not normalize until the war ends or new ships are built, a process that could take years.
3: What should readers watch next?
Watch inventory levels in U.S. and Western markets, which anchor benchmark prices, rather than the volume moving through the strait. Our base case is Brent averaging $100 through 2026 and 2027.
About Enverus Intelligence® | Research, Inc. (EIR)
Enverus Intelligence® | Research, Inc. (EIR) is a subsidiary of Enverus that publishes energy-sector research focused on the oil, natural gas, power and renewable industries. EIR publishes reports including asset and company valuations, resource assessments, technical evaluations, and macro-economic forecasts and helps make intelligent connections for energy industry participants, service companies, and capital providers worldwide. See additional disclosures here.
