Page 5 - NorthAmOil Week 02

NorthAmOil COMMENTARY NorthAmOil
– international crude price movements in early January. Crude prices spiked briefly at the start of the month, following a US airstrike in Iraq that resulted in the death of Iranian major-gen- eral Qasem Soleimani, prompting fears of war erupting in the Middle East. However, prices were quick to fall back as tensions in the region seemed to ease. WTI reached a recent high of above $64 per barrel on January 3, but was trad- ing at below $58 per barrel by January 15.
Indeed, global supply is so plentiful right now that even a potential major production outage in the Middle East could be offset by additional production from other countries, including Rus- sia and the US. This is also contributing to the short-lived nature of any oil price spikes caused by geopolitical events, and Canadian producers seem set to be disappointed if they are hoping that volatility elsewhere in the world would lead to higher crude prices that they could benefit from. This comes after WCS has already been faring worse than other crude grades in recent weeks.
“Canadian crude failed to participate in the relatively constant price increase since October, remaining largely below $40 per barrel,” JBC Energy said in a January 10 note.
“The suppressed prices are coming on the back of strengthened supply, in particular of heavy crude amid upgrader maintenance,” JBC added. Oil sands production was up 80,000 bar- rels per day (bpd) year on year in November, while inventories surged to 74mn barrels in the same month, close to all-time highs seen during the prior year. This was attributed to a leak and subsequent outage on the Keystone pipeline, which carries crude from the oil sands to the US, late last year.
Some good news
It has not been all bad news for Alberta’s oil industry, however. This week, pipeline opera- tor TC Energy said it was preparing to resume pre-construction work on the long-delayed Key- stone XL project – an expansion of the Keystone system.
In a filing with US District Court in Mon- tana, TC Energy said it would start mobilising heavy construction equipment in Montana, South Dakota and Nebraska in February. The company is aiming to begin building a 1.2-mile (1.9-km) segment of the pipeline spanning the US-Canada border in April, provided it receives the necessary approvals to proceed. Construction is anticipated to carry on into 2021 assuming it now proceeds as set out by the company.
Keystone XL is one of three major pipeline projects out of the oil sands that are currently underway, alongside the Line 3 replacement, also running to the US, and Trans Mountain’s expansion to the British Columbia coast. The projects have been frequently delayed by legal and regulatory hurdles over recent years. There are hopes, however, that work on all of them will accelerate this year, though legal challenges against the projects are still ongoing.
Enbridge’s Line 3 replacement currently appears to be on track to enter service first. However, given the number of delays that have already occurred, it would not be surprising if more were to crop up. If this happens, Alberta’s producers will increasingly rely on rail to send their crude to market. And for the provincial government, the longer the pipeline bottlenecks continue, the more difficult it will be to phase out the oil production curtailment.™
The longer the pipeline bottlenecks continue, the more difficult it will be to phase out the oil production curtailment.
TC Energy is preparing to resume pre- construction work
on Keystone XL next month.
Week 02 15•January•2020 w w w. N E W S B A S E . c o m
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