The benchmark crude oil price in North America is West Texas Intermediate (“WTI”). WTI represents the underlying commodity of the New York Mercantile Exchange's oil futures contracts, and is a light, sweet crude with an API gravity of approximately 39.6 degrees.
As a largely heavy oil producer, our production is typically priced based on a Canadian heavy oil benchmark price, referred to as Western Canadian Select (“WCS”). WCS is made up of existing Canadian heavy conventional and bitumen crude oils blended with sweet synthetic and condensate diluents, and has an average gravity of 20.5 degrees API.
WCS trades at a discount to WTI due to the higher cost of refining WCS crude into refined products, such as gasolines, jet fuel, kerosene, and diesel. This discount is referred to as a heavy oil differential.
Approximately 80% of Baytex's heavy oil production is priced off WCS. The actual raw heavy oil price that Baytex receives for its heavy oil production is further reduced by the cost of blending the heavy oil with diluent to meet pipeline specifications.