The price oil sands producers can charge fell to $96/barrel on Friday while global crude prices remained firmly around the $118/barrel level as Canadian supplies swamp the US.
Building new pipelines would remove the glut but it’s almost three years since TransCanada first applied to extend its Keystone pipeline to US refineries on the Gulf coast and Enbridge’s project to pipe crude to the west coast for export to Asia will languish for another 18 months in a review process.
Approval is by no means certain. All this while US need for crude continues to seep away and Chinese demand grows at double digit rates.
Brent crude for August delivery was down 23 cents at $118.36 a barrel at midday on Friday, while US August crude was down $2.35 at $96.32, bringing the spread to $22.27, the largest since the record premium on June 15 of 23.34 intraday, according to Reuters data.
Canada exports two million barrels of crude to the US per day of which 1.5m come from oil sands meaning Alberta producers are losing out on a possible $33m in revenues each and every day.
Reuters quoted TransCanada Chief Executive Russ Girling on Thursday on the crude oil bottleneck in the U.S. Midwest that is now depressing North American oil prices:
Girling said the Cushing, Oklahoma-to-Texas portion of the proposed oil pipeline will have enough space to drain off much of the glut of crude at the Cushing storage hub that is keeping benchmark West Texas Intermediate crude prices well below Europe’s Brent benchmark.
The Globe & Mail reported in June how slowing demand in the US builds pressure for a go-ahead on Canada’s other large pipeline project, Enbridge $5.5bn 1,100km Northern Gateway pipeline, which would transport oil sands crude to Asian markets via a new port facility at Kitimat.
“Accessing Asian markets (Japan, South Korea, China, Taiwan and Singapore) would ensure world prices for Western Canada’s oil.’’
Platts reported on Friday TransCanada saying US confidence in oil pipelines needs to be rebuilt:
“Incidents in the past 18 months have shaken public confidence and threatened the social license of pipeline companies to do business,” company President Russell Girling said at a TD Securities conference here.
On Thursday the Wall Street Journal opined on the importance of Barak Obama approving the KeyStone XL project (sub required):
With 9.1% unemployment and gasoline prices in the stratosphere, President Obama must sometimes wish that some big corporation would suddenly show up and offer a shovel-ready, multibillion-dollar project to create 100,000 jobs and reduce U.S. reliance on oil from dictatorships.
Oh, wait. His Secretary of State has had that offer sitting on her desk since she was sworn in. The trouble is that the Administration can’t approve it without upsetting its anti-fossil fuel constituency. And so the proposal sits.
Data released on Friday showed the US unemployment rate rising to its highest level in 2011 at 9.2% with official figures of 14.1m looking for work.
The Time blog Ecocentric reports Friday on the possible fallout for TransCanada as a result of the July 1 oil spill in the Yellowstone River, which the XL Pipeline would also cross:
ExxonMobil has been under a harsh spotlight over the last few days, facing accusations that the company has deliberately downplayed the severity of the Yellowstone River oil spill.
It’s an object lesson in the political risks of owning a pipeline. So the energy company TransCanada would do well to be careful with their next project.
The Vancouver Sun reported Tuesday on Transportation Safety Board of Canada incidents over the past two years:
The log entries by investigators are dominated by two Alberta-based companies, Enbridge and TransCanada, which are involved in nearly three quarters of the reported cases, including 21 incidents on the latter’s new multibillion-dollar Keystone pipeline, which launched the first phase of its commercial operation in June 2010.