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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (51281)	1/30/2015 9:13:06 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67706

Organization of Petroleum Exporting Countries (OPEC) bnn.ca ANALYSIS: The more Canada’s energy patch experts shrug and say “we’ve been through this before,” the more it seems clear this downturn will be worse than the many dips of decades past. For months now they have claimed the 60% collapse in crude oil prices was simply a brief blip and that Canada’s oil and gas industry – Alberta’s oil sands in particular – worked on much longer timelines and thus could easily weather the worsening storm. More recently, the optimists have become slower to offer their opinions and the experts now admit Alberta is fated to fall down the “doomsday” rabbit hole yet again. “Oilmageddon” is how Peter Tertzakian described the current situation this week. The chief energy economist at ARC Financial and a noted author made an eloquently convincing case for the latest crude price crash being so “epic” that one day, years from now, we will reminisce about it to our grandchildren. Andrew Leach, noted energy economics professor at the University of Alberta, initially argued the crash of late 2014 wouldn’t be as bad as the last one that hit in 2008, but as of this week he is “a lot more bearish.” “Overall, I’m not sure panic helps anyone, but it seems that, after a long, second look, the industry may be in for a rougher ride from this oil crash than it took in 2008-09,” Leach wrote in his latest assessment of the increasingly bleak-looking situation. Unlike the last crash in 2008, which was driven by a dip in global demand as a result of the Great Recession, the latest oil crisis comes from too much supply. The Organization of Petroleum Exporting Countries (OPEC) has refused to pull back its throttle on production and despite tens of billions of dollars in non-OPEC energy spending being delayed, production from outside the world’s top oil cartel is still expected to grow by nearly a million barrels per day this year. Even in western Canada, home to some of the highest crude oil production costs in the world, massive spending cutbacks has barely curtailed production so far. Just last week (Jan 21) the Canadian Association of Petroleum Producers (CAPP) warned capital spending by oil and gas producers in western Canada would fall roughly 33% in 2015 to about $46-billion from $69-billion the year before. Despite that dramatic drop, CAPP still forecasted 150,000 bpd in new production coming online this year and a similar amount being added to Canada’s output in 2016. The main industry lobby group did stress, however, that its forecast was just a snapshot of a moment in time, suggesting more cuts beyond the $23-billion already cited in its update were in the works. To wit: Pengrowth and Cenovus slashed another $1-billion+ between them in the days since CAPP’s update and Encana is widely expected to slash hundreds of millions more from its budget before the end of next month. Canadian Oil Sands’ (COS.TO Market Call Tonight - Part Seven 20.58%) fourth quarter results from late Thursday brought the death of the proverbial canary in the crude mine. In 2009, in the wake of the gigantic market crash brought on by the Great Recession, the largest shareholder in the Syncrude oil sands mining consortium cut its quarterly dividend to just $0.15 per share. That was the company’s lowest payout ever, until now. In conjunction with broadly disappointing quarterly results, COS also cut its dividend to $0.05 per share or roughly one third of what was previously its lowest level ever. Ottawa has delayed the next federal budget to April as the Parliamentary Budget Office warned this week that the government’s $3-billion “contingency” fund is pretty much the only way to avoid massive deficits. Alberta Premier Jim Prentice, meanwhile, who has long maintained the latest crude price crash is the most serious fiscal circumstance his province has faced since 1986, this week declared Alberta to be in a “price war” with OPEC. As a result of that war, the world is producing more than a million barrels of oil every day that it doesn’t need. And so long as the lower spending and the hits to headcounts don’t translate to lower overall production, it will take years before this war is won. Jameson Berkow is BNN's western bureau chief based out of Calgary. You can follow him on twitter @crudereporter