• 4 minutes Ten Years of Plunging Solar Prices
  • 7 minutes Hydrogen Capable Natural Gas Turbines
  • 10 minutes World looks on in horror as Trump flails over pandemic despite claims US leads way
  • 13 minutes Large gas belt discovered in China
  • 45 mins Chicago Threatens To Condemn - Possibly Demolish - Churches Defying Lockdown
  • 12 hours Let’s Try This....
  • 1 hour COVID 19 May Be Less Deadly Than Flu Study Finds
  • 8 hours New Aussie "big batteries"
  • 2 hours Would bashing China solve all the problems of the United States
  • 12 hours The CDC confirms remarkably low coronavirus death rate. Where is the media?
  • 3 hours 60 mph electric mopeds
  • 4 hours China to Impose Dictatorship on Hong Kong
  • 4 hours Pompeo's Hong Kong
  • 9 hours Monetary and Fiscal Policies in Times of Large Debt:
  • 1 day Nothing can shake AMLO’s fossil-fuel fixation
  • 8 hours Backlash Against Chinese
  • 1 day Iran's first oil tanker has arrived near Venezuela
Russia To Expand Influence In Iraq’s Oil Heartland

Russia To Expand Influence In Iraq’s Oil Heartland

Russia has once again signalled…

Adjusting To The New Reality In Oil Markets

Adjusting To The New Reality In Oil Markets

Oil markets rebounded strongly over…

Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

More Info

Premium Content

Canadian Oil Benchmark Falls Off A Cliff

Third time is a charm as China has reset its currency peg for a third day on the trot. The law of diminishing returns means markets are somewhat insulated from the fear factor of a third day of currency devaluation, while financial markets put on their rose-tinted glasses and buy in (literally) to the prospect that this latest attempt from China to stimulate its economy just might work. Hence, global equity markets are looking perky, the dollar is seeing some strength, and crude prices are getting pressured lower once more.

U.S. economic data returns to the fore, with weekly U.S. jobless claims coming in just shy of consensus at 274,000 (but no biggie), while tales of retail sales come in better than expected at +0.6%, versus 0.5% consensus. (Go-go gadget rate hikes!).

The big conundrum the crude complex is having to deal with here in the U.S. is refinery and pipeline issues in the Midwest. An outage at the Whiting refinery, the largest in the Midwest, could keep 240,000 barrels a day offline for a prolonged period, stoking fears that Cushing stocks could get filled to the brim in the coming months. Meanwhile, the loss of demand for Western Canadian Select crude (see below) sees its price plummet to the low $20s – only worsened by a pipeline leak on the Flanagan South in Missouri (although this is expected to re-start today).

While we have seen the lagged impact between the falling rig count and the ripple effect to U.S. production play out rather well over the last nine months, North Sea production highlights that investment periods work over a much longer time-frame. Hence, as investment in the North Sea has picked up over the last four years to participate in an oil market predominantly spending its time in triple digits, output has risen for two consecutive years (hark, first time since 2000)…..only to be greeted by oil in forty dollardom. Output is likely to turn south once more in the coming years. Related: Some Light At The End Of The Tunnel For Oil?

As Canada’s crude benchmark, Western Canadian Select (WCS), drops below C$30 (~$23) a barrel, here are some alternatives that you can buy in Alberta for the same amount of money: Related: The Best Buys In Nanotech For Energy Investors

(Click to enlarge) Related: Bullish Bets On Oil Go Sour

The recent precipitous price drop in WCS is not only due to the global rout in oil, but has been exacerbated by a combination of rebounding production after wildfires in the spring, and the aforementioned shutdown of key refineries and pipelines in the U.S. Midwest.

Meanwhile, the price of Bakken oil has dropped to $30. While break-evens in the original gangster of shale plays run the gamut, apparently half of its wells can generate positive returns at this price level. EOG Resources (largest shale driller) says it can make a 30% return on $50 oil in its best plays, while Whiting Petroleum Corp. (largest Bakken producer) says it is ready to grow production above $40.

By Matt Smith

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




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