From Rigzone:
Within the last two weeks, the oil market delivered some bad news for
oil and gas companies operating in Western Canada. The bad news can be
summarized by the headline of an article on the commodity page of the
Financial Times: "Canada's oil becomes cheapest in world amid glut in
Alberta."
The forces that have created this situation include surging oil
production, lower demand due to refinery maintenance and a chronic
shortage of pipeline capacity to move growing volumes beyond the
regional Canadian market. The impact of these conditions caused the
price for Western Canada Select, the regional benchmark for low quality,
viscous heavy oil, to fall below $45 a barrel, less than half the cost
of other crude oil benchmarks. This price disparity is estimated to be
costing the Canadian oil and gas industry about C$2.5 billion per month,
or an annualized income loss of C$30 billion, or about 1.6% of Canada's
gross domestic product.
With the price of Canada's heavy oil this low, it is selling for less
than half the $111 a barrel price (December 26, 2012) consumers are
paying for Brent oil, the global oil benchmark. Furthermore, Canada's
oil is now selling at about $41 a barrel below the United States'
benchmark West Texas Intermediate crude oil, which in turn is trading
nearly $23 a barrel below Brent.
I've always said the Canadian oil sands were the "canaries in the coal mine" when discussing the viability of the Bakken. Thank goodness for rail.
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