Canadian heavy oil cheaper than a pint of beer as North American demand for fuel plummets – by Geoffrey Morgan (Financial Post – March 27, 2020)

https://business.financialpost.com/

CALGARY – As commuters stay home and lockdown orders spread across the U.S., the price of Canadian heavy oil has collapsed. Western Canadian Select heavy oil price benchmark fell 30.5 per cent on Thursday to US$6.45 per barrel, which analysts joke is less than a pint of beer. U.S. crude prices fell 7.7 per cent to US$22.60 per barrel.

“Prices are so low that there’s no point in transporting if you don’t have to. If you can move it into storage, you will,” said Stephanie Kainz, senior associate at RS Energy Group, a division of Austin, Tex.-based Enverus.

However, Canadian producers that are able to move their barrels directly to the U.S. Gulf Coast refineries through existing pipelines have been able to enjoy higher prices, of close to US$16 per barrel, as American refineries still want Canadian heavy oil, despite dwindling demand for fuel.

“U.S. refiners that can process heavy sour crudes have historically enhanced their margins by importing Canadian crudes, priced at a discount to West Texas Intermediate North American benchmark prices,” Moody’s Investors Service analysts wrote in a Thursday report, which said the outlook for refiners is negative for the next 12 to 18 months.

A similar pricing dynamic is evident at the pump, as huge swaths of the Canadian population work from home. GasBuddy data shows the cheapest place to buy retail gasoline in Canada right now is the tiny hamlet of Walsh, Alta. on the TransCanada Highway just west of the Saskatchewan border, where fuel can be bought for 48 cents per litre.

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