- Crude oil from Canada’s tar sands has slumped to $23/bbl, chopped in half since July 1 and widening its discount to West Texas Intermediate to nearly $20/bbl, due to a combination of steadily rising production, pipeline constraints and an unexpected outage at a U.S. refinery.
- The price plunge has done little to curb output because oil sands projects require years to plan, construct and pay back; Imperial Oil (NYSEMKT:IMO) recently doubled production capacity at its Kearl oil sands project to 220K bbl/day, and Canadian Natural Resources (NYSE:CNQ) last week said it was built to withstand low commodity prices even as it lost C$405M in Q2.
- At current oil prices, typical oil sands producers are just covering their operating costs, while companies with higher operating costs are “losing money with each barrel they’re producing," says the VP of energy research at ARC Financial in Calgary.
- The results have spilled beyond the oil market into Canada’s economy, forcing the central bank to twice cut interest rates, driving the Canadian dollar to a decade low and impacting the debate ahead of October's federal election.
- Other related tickers: TRP, ENB, SU, CVE, TCK, CEO, OTCPK:HUSKF