The Canary In The Coal Mine -- WTI-Bitumen Spread

Early on in the Bakken, a lot of folks were concerned whether the boom could last if the price of oil fell. I always maintained that as long as they were mining bitumen in western Canada, the Bakken boom was "safe." The premise is that the margin on Bakken oil is much better than the margin on bitumen. If operators can make a profit, or stay in business long enough for the price to come back in the Canadian sands, they can do as well or better in the Bakken.

So, this was a nice article to see (sent to me by Don -- thank you). The Calgary Herald is reporting:

Alberta bitumen passed the $85 per barrel mark this week.

That's almost double what Alberta was getting for its raw bitumen in January, when prices were about $45 per barrel. And since all prices are based on U.S. dollars, and the loonie has dropped in value compared to its American counterpart, Thursday's price of $85.50 looks even sweeter.

The most important international benchmark, West Texas Intermediate (WTI) oil at Cushing, OK, was trading for $101 per barrel. And Western Canada Select (WCS), the benchmark blend that includes bitumen, was $91 per barrel at the Hardisty terminal, according to trading data from Flint Hills Resources.

The resulting differential of just $10 per barrel is considered excellent for western Canadian producers, and an improvement over the $16.50 average differential last month. In January, it was as high as $40.

An earlier article noted how bad the spread can be.