And that’s not the only problem. The other problem is the incredibly unsustainable oil sands that are at the heart of the Canadian oil industry. The severe negative environmental externalities associated with the tar sands and their form of extra-heavy crude – natural bitumen is a type of thick, viscous, sticky crude oil that is particularly dirty – have caused many disputes and faced large fines. . from polluter pays principles.
But now it looks like there is finally good news coming on the pike for the tar sands. According to BMO Capital Markets, Canadian oil prices are expected to improve over the next year thanks to a decrease in Mexican exports of heavy crude to refineries on the US Gulf Coast, opening up the market for oil. Canadian. “Oil sands producers will benefit from lower production of competing crude from Latin America as Petroleos Mexicanos plans to cut exports while Venezuelan supplies remain banned due to US sanctions,” Bloomerg said. reported Thursday. Pemex, a Mexican state-owned oil company, “predicts a nearly 70% reduction in exports of its flagship heavy crude product between 2021 and 2023,” Bloomberg said.
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BMO’s report, released on Wednesday, says the spread between Heavy Western Canadian Select and the benchmark West Texas Intermediate is expected to narrow in 2021, potentially reaching a spread of just $ 5 to $ 7. “Western Canadian Select’s rebate for WTI has dropped to less than $ 10 a barrel since mid-April, after more than one million barrels per day of oil sands production was shut down due to the Covid pandemic -19, ”continues the Bloomberg article. “The large differential remained close to $ 10 even as oil sands supplies returned to the market.
Over the past several decades, U.S. oil refiners on the Gulf Coast and in the Midwest have invested heavily in installing infrastructure specifically designed to handle heavy crude, largely to process the types of oil sold by Mexico and Canada now that other grades of oil from the Americas have been greatly diminished. Canada, in particular, is one of the world’s largest producers of these types of heavy crude, which has gained a lot of value since the lighter grades of oil from Latin America became more scarce. This trend is expected to continue for the immediate future – another boon that Canada’s oil markets desperately need.
And, in one final piece of good news, it looks like Alberta’s long-standing pipeline problems will ease a bit over the coming year as well. With three major export pipelines already under construction, Canada will be able to bring at least 50,000 barrels per day of additional exports to market. If only Canada could share some of its good fortune with its neighbors to the south, where American shale exporters are still waiting – perhaps in vain – for a ray of hope for their own oil market in full swing.
By Haley Zaremba for OilUSD
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