Canadian oil producers are bleeding cash at current costs, according to a new credit record from TD Stocks, however the crude taps are still not likely to shut anytime quickly. The majority of Canada’s approximately four million barrels of day-to-day crude oil is created in the oil sands of northern Alberta. One of the most typical approaches of extraction in that region is a procedure called steam-assisted gravity-based drainage or SAGD, which the TD record released Tuesday says requires a West Texas Intermediate rate of a minimum of US40 per barrel just to cover fundamental operating expense. As a matter of fact, the report finds only in between 20-30 per cent of complete Canadian oil production can create any kind of good cash flow at current prices. Company prices and the capacity for even a razor-thin revenue margin were not included in the TD analysis, indicating SAGD producers call for even higher prices in order to continue to be sustainable in the longer term. That approach of removal represent more than half of overall oil sands manufacturing, or roughly 1.2 million barrels daily, based on the most up to date numbers from the Canadian Organization of Oil Producers.
Standard heavy oil production, which makes up approximately 400,000 bpd is closer to breaking even with present rates floating around US30 each barrel, yet is still losing cash with TD fixing about US32 per barrel as the called for break-even cost. Once again, that number does not factor in company or various other costs involved in manufacturing. Canada’s only type of crude oil manufacturing with the ability of covering its own expenses at existing costs is the lighter mix most similar in top quality to WTI. Light and also medium blends represent regarding 20 percent of total Canadian manufacturing, or about 800,000 bpd; and also, based on TD, can recover cost at an average WTI rate of simply US21.50 each barrel. Nonetheless, part of the reason TD’s break-even number is so low is because it chose to leave out maintaining funds in its analysis of light as well as tool manufacturing, meaning the numbers assume operators will permit their manufacturing to fall. Although this creates a little an apples-to-oranges contrast, we compete that this is generally reflective which sets you back the industry is electing to take in versus postpone the TD record discussed.
It is quite tough to see exactly how oil costs can elevate substantially in the short-term the International Power Company claimed in a credit report released Tuesday. The Paris-based company predicts worldwide need growth to slow significantly in the first fifty percent of 2010, pressing the international supply excess also higher as consulting company Timber Mackenzie anticipates less than one tenth of one per-cent of the globe’s oil result has been stopped as a result of the continuous rate accident. The IEA estimates the world to be producing 1.75 million bpd greater than it can take in. American manufacturers are anticipated to cut as much as 700,000 bpd in result this year based on the U.S. Power Info Administration however that would still leave the world oversupplied by more than one million bpd.
Canadian oil producers will not have the ability to quit hemorrhaging money until the remainder of that oversupply can be absorbed, permitting fundamental market pressures to push prices higher. With demand development sliding and also supply staying stubbornly high, there is no informing exactly for how long that may take as well as in the meantime, four out of every 5 barrels this nation extracts is pushing producers deeper right into debt and also closer to bankruptcy. The much longer that cost healing takes, the less Canadian oil manufacturers there will be delegated to reap the benefits. Globally, there are 3.4 million bbls/d of oil that presently cannot cover operating costs, indicating Canadian manufacturing represents 65 percent of the money-bleeding barrels being created. We are the greatest price manufacturer, bar none. Our nearest rival in the race to lose money is Venezuela, which has 350,000 bbls/d of primarily useless production. The cold, difficult truth is that in a free oil market not constrained by OPEC supply administration, Canada cannot contend. We generate the most expensive oil around the world and also we market it at the most affordable price on the planet.