Exactly.
North American Oil Differentials: Here to Stay
'With so much supply landlocked, Canadian oil prices are taking a serious hit. The benchmark price for Canadian heavy oil is Western Canada Select (WCS), which is currently trading at just US$59.33 per barrel. By contrast, WTI is priced at US$82.70, which means the differential is a whopping US$23.37 per barrel, or 28% higher.
Even Canadian synthetic - a partially upgraded bitumen product that has historically carried a premium to WTI - is trading at a discount to its American peer: Canadian synthetic is at US$79.13 per barrel. It's a double-whammy differential: Canadian oil is heavy, which discounts its price; and the system to move it to suitable refineries is clogged up, creating another discount. Neither of those situations is going to change any time soon, and that means oil-sands projects may soon be on the chopping block.
The oil sands is one of the costliest oil regions in the world to develop; and with WCS prices so low, the economics behind many new oil-sands projects have become pretty weak. New oil-sands mines require a price of around US$80 per barrel to break even. If an upgrader is part of the plans, that break-even price rises to almost US$100. In-situ projects, which use wells and underground steam injection to extract oil from the sands in place, usually carry a break-even price near US$60 per barrel.
But even with some projects postponed and others slowed, bitumen production is still expected to climb rapidly. Estimates range, but most observers agree that it is likely the oil sands will be producing close to 2.7 million barrels a day by 2016, up from 1.6 million bpd last year.
That kind of investment means that every time new pipeline and refining capacity is built, supply will catch up and the system will remain chockablock. And that means the differential between Canadian and US oil prices is settling in for a long stay.'
financialsense.com
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Hard to say how long Canada will stay locked in to self-destructive practices. We're losing billions every month, to our biggest customer's profit.
There's a better way here: Message 28128701
-- and here: blogs.canoe.ca
Jim |
