January 4, 2016 / 10:30 PM / in 2 years

Investment firm launches first outright price index for Canada crude

CALGARY, Alberta (Reuters) - A Canadian investment management firm launched the first-ever real-time index monitoring the outright price of heavy Canadian crude on Monday, based on prices published by derivatives exchange ICE Futures Europe.

Canada is the No. 1 supplier of crude to the United States and home to the world’s third-largest reserves, but its crude has always been priced at a differential to the U.S. benchmark West Texas Intermediate CLc1 SHRWCSMc2.

Auspice Capital Advisors Ltd founder Tim Pickering said that pricing differential deters investors from trading Western Canada Select crude, the de facto Canadian benchmark grade, and the new Canadian Crude Oil Index .CDNCRUDE will improve transparency and liquidity.

The firm is hoping clearer pricing will attract more investors to its Canadian crude oil exchange-traded fund, launched last May.

At present, around 1.7 million barrels a day of WCS crude are sold through the Alberta marketing hub of Hardisty, but trading is concentrated on physical barrels rather than derivatives contracts, Pickering said, unlike the market for WTI in which financial trading dwarfs physical transactions.

“We believe Canadian crude does not get its fair share,” Pickering said. “It’s an esoteric, wholesale physical marketplace and we think one of the things holding back the price of the commodity is the lack of global market participation.”

Canadian heavy crude tends to trade at a hefty discount to WTI due to a number of factors, including quality and the cost of transporting barrels to market. It has plunged over the last 18 months in line with global benchmarks.

WCS last traded at an outright price of $23.28 per barrel, a discount of $13.60 per barrel to WTI.

The new index is tracked and reported on the New York Stock Exchange website and available to traders through outlets including Thomson Reuters Eikon and Bloomberg terminals.

Reporting by Nia Williams; Editing by Leslie Adler

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