Boyd, Roosen, Quartermain: It takes grit, invention, luck to make the big time
Mining industry legends discuss the backstories on their multibillion-dollar successes.
The price oil sands producers receive fell to almost $54 a barrel below the international benchmark on Tuesday, as the discount of Western Canada Select to US benchmark West Texas Intermediate (WTI) deepens to a level last seen nearly five years ago.
WCS – a blend of heavy oil sands crude and conventional oil – dropped to multi-year lows with the December contract weakening to $41.79 below WTI, a near 20% worsening in less than a week.
The relative weakness in oil sands crude comes on top off a slide in US oil to four month lows below $94 on Tuesday on fears of a seventh straight increase in the country’s oil inventories and longer term prospects of Iranian oil returning to world markets.
While the Canadian blend has fallen further behind global benchmark prices, WTI’s discount to North Sea Brent has narrowed substantially to around $12 a barrel, halving the $23 gap recorded in December.
Brent settled at $105.40 in Europe on Friday which translates to an effective price for bitumen-derived oil from Alberta’s oil sands of just $51.40 a barrel.
The value of Syncrude, a light oil made from oil sands after undergoing an expensive upgrading process, has also reversed fortunes declining to a $15 discount to WTI last week, levels last seen in March 2012, against historical trading of a slight premium.
The pervasive bitumen discount to global oil prices is not because Alberta’s oil sands crude is of inferior quality.
Maya heavy oil from Mexico is of similar quality to the oil sands blend but is priced at a $40 premium to Canadian crude today.
Unlike Canada, Mexico hedges its oil output and in September the Latin American nation locked in the best price for its crude in history at just over $90 a barrel for 2014.
The reason Canada’s oil attracts these pricing levels is because the country only has one customer – over 99% of Canadian exports end up in the US.
Alberta’s landlocked oil cannot reach lucrative growing markets in Asia because of a lack of pipelines which turns the province into a price-taker.
4 Comments
jimbo
if oil produced in canada could reach asia customers at higher world prices it would mean more money in canadian coffers for education,health care,welfare,canada pension,perhaps even lower income tax,and lower interest rates.With 170 Bil bbl of oil in the oilsands,it makes good cents to share.
Murray_Stone
Alberta does indeed take a hit because of the price differential, but the industry as a whole does not. The low price of exported WCS is the same low price that industry refiners pay for their feedstock. What the industry loses on the merry-go-round they make up on the swings. Because the Province refuses to recognize this, it doesn’t have the guts to impose a more robust royalty regime.
Stewart Pid
Murray do you not realize that most oil companies are producers only and have no down stream operations at all and so they can’t recover the price differential on the refining side? Are you that lacking in knowledge of this industry that this fact escaped you and if so why are you commenting in a public forum where your ignorance is on display to the world?
David_R59
That G7G plan is looking better all the time! It’ll probably pay for itself in no time.
ie. the rail-link into the Alaska panhandle.