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JPMorgan: $80 Oil Is 'Remarkably Cheap'

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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Why Is Canadian Oil So Cheap?

Western Canadian heavy crude’s price discount to WTI widened to the most in three years, at US$23 for the January contract and US$27 for the December contract, after Enbridge announced a new rationing of space in parts of its Mainline network, which is used to carry most of the crude Canada exports to the United States.

The rationing was prompted by unplanned outages in the network and will cause the accumulation of crude oil at storage hubs across Canada’s top oil producer, Alberta. Enbridge’s announcement for an apportionment on parts of the Mainline network is the second in as many months, sparking worry about a glut.

This accumulation comes on the back of the two-week suspension of TransCanada’s Keystone pipeline following a leak, which also caused a build of crude oil inventories in Alberta, pressuring prices. What’s more, Keystone, which has a capacity of almost 600,000 bpd, is currently running at 20 percent lower pressure, while environmental regulators investigate the leak, which totaled 5,000 gallons of crude.

Meanwhile, WTI is also enjoying a deeper discount to Brent, which yesterday soared above US$65 a barrel for the first time since 2015, after Ineos announced it was shutting down the Forties oil pipeline network for several weeks following the discovery of hairline fractures in parts of it. As a result, about 80 crude oil platforms in the North Sea will have to stop pumping oil. The Forties network, with a capacity of 450,000 bpd, carries to land about 40 percent of the UK’s North Sea crude oil production.

Find 150+ crude oil prices on our brand-new oil price page, including U.S., Canadian and OPEC blends.

Although WTI also inched up, to about US$58.40, its price increase was more modest than Brent’s. This means that the American crude will likely become even more attractive for bargain hunters in Asia, where it is already displacing the more expensive Brent-linked Middle Eastern crudes.

By Irina Slav for Oilprice.com

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Leave a comment
  • Pepe III on December 12 2017 said:
    Canada is desperate, their oil and gas industry is in dire straits. Just look at all the dead wells left abandon, no money left to clean up, the tax payers will have to take the hit . This price is a fire sale. It reminds me of the final days of circuit city, a going out of business type sale.
  • Boodrow Malone on December 12 2017 said:
    With Canadian crude this low I wonder if it might be worthwhile to truck crude the 1170 miles from Fort Nelson BC area to Fairbanks and either refine it there or put it into the Trans Alaskan Pipeline.
  • Andrew on December 12 2017 said:
    Seems to be the compromise between left and right in Canada and Alberta. We will ship oil but we will do everything in our power to make the profit margins as small as possible
  • Canuck on December 12 2017 said:
    Thou "shale" not steal. The shell games continue.
  • NickSJ on December 13 2017 said:
    This is an obvious consequence of the delay in approval of the Keystone XL pipeline, which is now mired in further delays due to Nebraska's "approval" of a route which was not applied for or studied. It's sad to see such unnecessary problems due to government obstructionism.
  • Dutchman on December 13 2017 said:
    The Canadians are getting caught right now in a squeeze, but it will soon pass. The discount is designed to get buyers to ship out oil by rail rather than wait for ht Keystone to get back to full capacity. Pipeline outages like that cause huge headaches at storage depots and itis often better to simply take the hit and ship by more expensive means.

Leave a comment




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