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GLUT: Oil sands crude drops below $60 a barrel

About 20% of bitumen is extracted through mining

The price oil sands producers received fell back to more than $37 a barrel below US benchmark crude this week, dropping to lows last seen in January.

The deepening discount paid for Western Canada Select – a blend of heavy oil sands crude and conventional oil – comes on top of a slide in West Texas Intermediate (WTI).

WTI dropped 1.8% to below $94.65 a barrel on the New York Mercantile Exchange on Friday, down more than 3% during the week to levels last seen in June.

According to a US Energy Department report issued Wednesday oil stocks climbed by 4.1 million barrels over the past week, more than expected and the sixth rise in a row.

Global benchmark prices in the form of North Sea Brent also come under severe pressure trading at $105.85 on Friday amid a broad selloff in commodities.

MarketWatch quotes Darin Newsom, senior analyst at DTN, a commodity-market research company:

“Investment traders are giving up on commodities in general. The U.S. dollar index has seen a strong rebound, leading to increased selling in the three Kings of Commodities (gold, crude oil, and corn). Charts would indicate this isn’t going to change any time soon.”

Today’s effective price for for bitumen-derived oil from Alberta’s oil sands of $57.25 a barrel is the lowest since February  this year with the discount more than doubling since early July.

The US is Canada’s sole customer for crude and the glut in the US  has turned Canada into a price taker as pipeline projects suffer years of delays, denying domestic producers access to lucrative growing markets in Asia.