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Berkshire Hathaway Share Purchase Boosts Suncor Stock

Suncor

Warren Buffett’s investment firm Berkshire Hathaway acquired 10.8 million shares in Canada’s Suncor during the last quarter of 2018, CNBC reports citing a SEC filing. The release of the news pushed the oil company’s stock up by as much as 4 percent.

Suncor reported a net loss for the last quarter of 2018, but the operating result of the company was positive, at US$436 million (C$580 million). The company, however, boasted record-breaking production of 740,800 barrels of heavy crude daily and also record refining rates of 467,900 barrels daily over the period.

Suncor is the largest oil company in the Canadian oil sands patch and it was a vocal opponent of the Alberta government’s decision to impose mandatory production cuts on local oil companies to stabilize prices.

“Our position is that government intervention in the market would send the wrong signals to the investment community regarding doing business in Alberta and Canada. And we really do need to take a long-term view and allow the market to operate as it should,” a spokeswoman for the company said when the Alberta government began to consider the cuts as a remedy for the huge discount, at one point of over US$50 a barrel, at which Western Canadian Select was trading at to West Texas Intermediate.

However this gap has closed faster than initially expected, Suncor CEO Steve Williams said during the company’s 2018 financial results conference call earlier this month. Now, he said, some negative unexpected consequences are making themselves visible.

“The differential corrected and overcorrected very quickly and the unintended consequence of that is the potential, the economics are seriously damaged and a lot of the rail movements are stopping or have stopped,” Williams said during the conference call.

The decline in Venezuelan heavy crude exports to the United States could help stoke up demand despite the price differentials, but U.S. refiners whose margins have been pressured by slowing demand for gasoline could also start looking elsewhere for cheaper heavy crude.

By Irina Slav for Oilprice.com

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