Canadian heavy crude is piling up in the Americas as record output collides with a costly global shipping squeeze, pushing Western Canada Select lower even while refiners in Asia and Europe struggle to secure similar barrels.

The imbalance is being driven less by a shortage of oil in North America than by the price and availability of tankers. Reuters reported Monday that Canadian, Colombian and Ecuadorian heavy grades had each fallen by more than $10 a barrel over six weeks, reaching their lowest levels in that period.

Freight costs overwhelm the crude discount

Western Canada Select was trading near $74 a barrel on Thursday before shipping and insurance costs, according to Argus Media figures cited by Reuters. Heavy crude normally attracts refiners because it is cheaper than lighter oil and can produce large volumes of diesel, but that advantage can disappear when transportation becomes too expensive.

A supertanker voyage from the U.S. Gulf Coast to Asia cost more than $80 million, or roughly $40 a barrel, last week. That was up from about $10 million to $15 million near the beginning of the year. A Gulf Coast-to-Europe voyage was estimated at $46 million, or $24.50 a barrel, compared with about $6.5 million, or $4 a barrel, before the Iran war began in late February.

Reuters attributed the jump partly to ship-to-ship transfers in the Gulf of Oman that are tying up vessels and reducing availability. The resulting freight bill has made it uneconomic to move some low-priced barrels to markets where benchmark oil remains above $100.

U.S. refiners have little room to absorb more

North American refiners cannot easily solve the problem by taking all of the stranded supply. U.S. refineries have operated at about 93.5 per cent of capacity on an average weekly basis this year, their highest rate in 28 years, according to U.S. Energy Information Administration data cited by Reuters.

Many Gulf Coast plants can process heavy crude, but their coking units are already running close to their limits. Some facilities are also configured for offshore Gulf of Mexico grades rather than Canadian or Venezuelan oil, which can require blending with lighter feedstock.

What the bottleneck means for Canada

Canada produces more oil than it consumes and depends on export markets to balance supply. The Canada Energy Regulator publishes monthly crude export volumes, destination data and average export prices, underscoring how access to transportation and foreign buyers shapes the value received for Canadian barrels.

The current gap illustrates the difference between the price at the production hub and the delivered cost in another market. A lower Western Canada Select benchmark can reduce revenue for producers and governments without automatically producing cheaper gasoline or diesel for consumers, because refining, transportation, insurance and global product prices remain separate parts of the retail cost.

The pressure could ease if tanker availability improves or freight rates fall. Until then, record Canadian output is competing for limited export capacity at the same time that buyers overseas are paying a premium for barrels they can actually receive.

Sources: Reuters, October 12 at 2:46 p.m. EDT; Canada Energy Regulator crude oil export summary; Wikimedia Commons image page.

Lead image: Pumpjack in Alberta, photographed by Marek Ślusarczyk in 2007 via Wikimedia Commons, CC BY 3.0. File photo; not an image of the October 2026 freight bottleneck.