• 2 minutes Oil Price Could Fall To $30 If Global Deal Not Extended
  • 5 minutes Middle East on brink: Oil tankers attacked off Oman
  • 8 minutes CNN:America's oil boom will break more records this year. OPEC is stuck in retreat
  • 3 hours Emissions Need To Be Halved To Avoid 3C Warming
  • 22 mins Iran downs US drone. No military response . . Just Destroy their Economy Completely. Can Senator Kerry be tried for aiding enemy ?
  • 2 hours The Pope: "Climate change ... doomsday predictions can no longer be met with irony or disdain."
  • 44 mins Here We Go: New York Lawmakers Pass Aggressive Law To Fight Climate Change
  • 6 hours Coal Boom in Asia is Real and a Long Trend
  • 2 hours Summit in Pyongyang: China's Xi Says World Hopes North Korea-U.S. Talks Can Succeed
  • 3 hours Pioneer CEO Said U.S. Oil Production would be up to 15 mm bbls/day NOW if we had the pipelines. Permian pipelines STARTING Q3
  • 12 hours Solar Panels at 26 cents per watt
  • 5 hours Huge UK Gas Discovery
  • 18 hours The Magic and Wonders of US Shale Supply: Keeping energy price shock minimised: US oil supply keeping lid on prices despite global risks: IEA chief
  • 18 hours Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 17 hours US to become net oil exporter in November: EIA
  • 16 hours Ireland To Ban New Petrol And Diesel Vehicles From 2030
  • 15 hours US Shale Drilling lacks regulatory body.
Alt Text

Oil Plunges On Fears Of Weak Demand

Oil prices fell another 4%…

Alt Text

Putin: Russia Is Fine With $60 Oil

Russia doesn’t need oil prices…

Jen Alic

Jen Alic

 

More Info

Trending Discussions

Why Canadian Crude is the Cheapest in the World

Canadian crude prices are at their lowest levels against Brent-priced crude in 10 months, reaching a new market low on Friday and trading last week at under $50/barrel.

This is less than half the price of international Brent-priced crude. Why?

•    Refining capacity isn’t evolving fast enough
•    Supply is increasing
•    Pipeline capacity is a bit tight

On Friday, West Canada Select has fallen $5.50 to a discount of $42.50/barrel. A key reason for this was the announcement by BP Plc (BP/) that it would delay a project to run ore heavy oil at its Whiting refining in Indiana for at least three months

BP’s project aims to convert a heavy crude processing unit with a 225,000-barrel/day capacity to enable 420,000 bpd capacity for processing Canadian crude. Originally, that was to be completed in the first half of 2013. The timeline has now been pushed to the second half of 2013.

Refining is a problem for Canadian crude. Production has picked up, but refining capacity lacks the same evolutionary momentum.

Pipeline capacity also has investors worried.

Related Article: What does the Future "Really" Hold for US Oil Production?

Canada’s Imperial Oil Ltd is now preparing to launch operations at another new oil sands site—Kearl—and is expecting to produce another 110,000 bpd of bitumen. This bitumen doesn’t need to be refined. It goes straight to the pipeline. Production should begin in January. Will there be enough pipeline capacity? Kearl’s addition to the flow will definitely make things tight.

Even in mid-November, Enbridge was saying its pipelines were already pretty much full. 

According to the Globe and Mail, analysts have estimated that Canada could run out of export pipeline room sometime between 2014 and 2018. Enbridge seems to think that time is already upon us. The pipeline operator also thinks that there won’t be any boost in capacity until the end of next year—at the earliest. This could mean a serious cut in profits due to backed up oil.

So right now, while production is steadily increasing, the game is all about finding new ways to market—not only for Canadian crude but increasing volumes coming out of North Dakota.

It’s clear, then, why Canada is so desperate to see the beleaguered Keystone XL pipeline clear the remaining hurdles in the US.

But there’s always an investment gem to be dug up under these heavy surfaces. Keith Schaefer, published of the specialized Oil and Gas Investments Bulletin, says that while the rising oil sands production is causing discounts for other Canadian oil producers, there is one exception to this rule—and it’s a good one.

In his latest missive, Schaefer notes that there is “one small group of producers selling their product for $14/barrel above WTI. It’s the single most valuable hydrocarbon in all of North America—not just Canada [and] it’s wildly profitable […] trading closer to Brent pricing than anything else in North America”.

The clincher is that it’s not oil—it’s natural gas.

By. Jen Alic of Oilprice.com




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment





Oilprice - The No. 1 Source for Oil & Energy News