As price takers in global oil markets, it’s a hard reality that Alberta’s oil producers are often caught up in a whirlwind of events on the other side of the globe they have no control over.But the price makers took steps on the weekend to underpin recent gains for the foreseeable future, sending futures above key economic thresholds for the time being.That’s because oil prices topped a key psychological barrier on Monday after OPEC+ agreed to extend production cuts for at least another quarter and Russia announced cuts of another half million barrels per day (bpd)..The Russian cuts, while unexpected, weren’t as much of a surprise considering ongoing Ukrainian attacks on its refining infrastructure, which has knocked out an almost equal amount of processing capacity.Consequently, North American benchmark West Texas Intermediate (WTI) briefly topped the key $80 threshold for the first time this year, while UK Brent climbed to $83.24.Although markets had baked in the numbers, the biggest beneficiaries were Canadian grades, which were all 8% to10% higher across the board. Upgraded Syncrude synthetic was actually trading above WTI at $81.57..Alberta’s signature Western Canadian Select (WCS) was up a toonie to $64.85. More important, the differential to WTI shrank to just under $15 amid reports that the oft-delayed Trans Mountain pipeline is on track to begin pumping oil starting in the second quarter.In its budget last week, the Alberta government is banking on a full-year WTI price of $74 and a $16 price differential to post a modest surplus next year.Because Canadian oil is priced in US Greenbacks but sold in Loonies, it adds up to about a 7% gain in relative price terms after factoring in currency translation. The Canadian dollar was down slightly on Monday, to US74 cents but has been in recovery mode on stronger than expected economic news, showing that the country has likely averted a recession..StatsCan last week reported the economy grew about 1% in the fourth quarter after declining in the third quarter. That’s still down from about 3.8% the year before. That means the Bank of Canada will likely hold interest rates flat when it meets on March 6, setting the stage for outright cuts later in the year. That in turn should be supportive for oil prices, especially considering the US economy grew 2.5% in the same period.Oil prices are further being supported by ongoing geopolitical tensions from the wars in Gaza and Ukraine and ongoing attacks on shipping in the Red Sea where the Houthis managed to sink a cargo ship with a rocket. ."So, I think when you couple those two with rising demand, which appears we're likely going to have, I would be surprised if we end the year anything less than in the $90s."Truist Securities Managing Director Neal Dingmann.Analysts said it all adds up to relative stability in the oil markets after two years of volatility stretching back to the pandemic.“It does create a floor. I think you take this, couple this with very, very limited domestic supply. I think that's what surprised folks last year when the US supply grew over a million barrels," Truist Securities Managing Director Neal Dingmann told Yahoo Finance. "So, I think when you couple those two with rising demand, which appears we're likely going to have, I would be surprised if we end the year anything less than $90s."
As price takers in global oil markets, it’s a hard reality that Alberta’s oil producers are often caught up in a whirlwind of events on the other side of the globe they have no control over.But the price makers took steps on the weekend to underpin recent gains for the foreseeable future, sending futures above key economic thresholds for the time being.That’s because oil prices topped a key psychological barrier on Monday after OPEC+ agreed to extend production cuts for at least another quarter and Russia announced cuts of another half million barrels per day (bpd)..The Russian cuts, while unexpected, weren’t as much of a surprise considering ongoing Ukrainian attacks on its refining infrastructure, which has knocked out an almost equal amount of processing capacity.Consequently, North American benchmark West Texas Intermediate (WTI) briefly topped the key $80 threshold for the first time this year, while UK Brent climbed to $83.24.Although markets had baked in the numbers, the biggest beneficiaries were Canadian grades, which were all 8% to10% higher across the board. Upgraded Syncrude synthetic was actually trading above WTI at $81.57..Alberta’s signature Western Canadian Select (WCS) was up a toonie to $64.85. More important, the differential to WTI shrank to just under $15 amid reports that the oft-delayed Trans Mountain pipeline is on track to begin pumping oil starting in the second quarter.In its budget last week, the Alberta government is banking on a full-year WTI price of $74 and a $16 price differential to post a modest surplus next year.Because Canadian oil is priced in US Greenbacks but sold in Loonies, it adds up to about a 7% gain in relative price terms after factoring in currency translation. The Canadian dollar was down slightly on Monday, to US74 cents but has been in recovery mode on stronger than expected economic news, showing that the country has likely averted a recession..StatsCan last week reported the economy grew about 1% in the fourth quarter after declining in the third quarter. That’s still down from about 3.8% the year before. That means the Bank of Canada will likely hold interest rates flat when it meets on March 6, setting the stage for outright cuts later in the year. That in turn should be supportive for oil prices, especially considering the US economy grew 2.5% in the same period.Oil prices are further being supported by ongoing geopolitical tensions from the wars in Gaza and Ukraine and ongoing attacks on shipping in the Red Sea where the Houthis managed to sink a cargo ship with a rocket. ."So, I think when you couple those two with rising demand, which appears we're likely going to have, I would be surprised if we end the year anything less than in the $90s."Truist Securities Managing Director Neal Dingmann.Analysts said it all adds up to relative stability in the oil markets after two years of volatility stretching back to the pandemic.“It does create a floor. I think you take this, couple this with very, very limited domestic supply. I think that's what surprised folks last year when the US supply grew over a million barrels," Truist Securities Managing Director Neal Dingmann told Yahoo Finance. "So, I think when you couple those two with rising demand, which appears we're likely going to have, I would be surprised if we end the year anything less than $90s."
