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The Keystone Oil Spill Effect

Friday November 8, 2019

1. Keystone outage boosts Bakken

- The Keystone pipeline is offline because of a significant spill in North Dakota, interrupting around 590,000 bpd of throughput. The outage has depressed prices for Western Canada Select, with the discount to WTI widening to as much as $23 per barrel.

- But the outage has also pushed up prices for Bakken oil, providing a temporary boost to Bakken drillers.

- Meanwhile, rail shipments are expected to rise quickly. “We are expecting crude-by-rail volumes into the south to rise as the Keystone outage has caused Alberta oil prices to decline, and with the province set to grant waivers to production that is shipped by rail from Canada,” Stephen Wolfe, an oil analyst at Energy Aspects Ltd, told Bloomberg.

- Shipping oil by rail requires a WCS-WTI discount of $15 to $20 per barrel in order to break even, according to Scotiabank. That compares to about $10 to $13 per barrel for pipeline. The current discount in excess of $20 per barrel means that rail shipments will likely increase.

2. Private equity’s fortunes in oil

- Private equity became a huge source of capital in U.S. shale in the last few years. The plan for PE is to acquire assets, turn them around, and then sell them a few years later.

- PE funneled more than $64 billion into oil assets since 2015, with $44 billion specifically in the U.S., according to Wood Mackenzie.

- It doesn’t…




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