Thursday, March 15, 2012

Canadian oil companies suffer from glut of oil in U.S. storage.

While gas at the pumps is going up, there is also a glut of oil as more and more goes into storage at Cushing Oklahoma. The result is that the gap between the price received for Canadian produced oil and European Brent priced oil is increasing.

Senior oil analyst Roger McKnight notes::"Canadian oil sands are getting about a $30 US a barrel discount to West Texas Intermediate (WTI). Brent crude buyers are paying WTI plus about $15 a barrel," "The reason for that spread is there is nowhere for the stuff to go because of the bottleneck at Cushing, Oklahoma which is the trading end point." This explains why there is such a rush to complete a pipeline from Cushing to Texas and the Gulf Coast.

Inventories are accumulating at this storage point. The situation is exacerbated as production is increasing in Montana, North Dakota, and Saskatchewan. McKnight claims the glut will become worse. This may be bad news for the oil companies but it is at least possible the glut might drive the price of oil down. However, I would not count on it! For more see this BNN article.

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