BP Refineries Run at 15-Year High to Gain From Cheap Canadian Oil

October 30, 2018, 2:26 AM CST
    Western Canadian crude traded at a large discount to WTI
    BP profits from cheap Canadian oil thanks to Whiting refinery

BP Plc ran its oil refineries at the hardest rate in 15 years during the third quarter, racing to profit from unusually cheap Canadian crude.

The British oil major said its refining business -- or downstream -- delivered adjusted profit before interest and taxes of $2.11 billion in the third quarter, up from $1.46 billion during the second quarter. Much of the increase came from "higher North American heavy crude oil discounts," BP said. The company said that its trading unit, one of the largest in the industry, also delivered better results than in the second quarter.

BP is able to profit from cheaper Canadian crude better than its rivals since it spent $4 billion in 2012 and 2013 to overhaul its largest refinery, located in the outskirts of Chicago, to process low quality crude that arrives directly via pipeline from Canada. Whiting refinery can now run on a diet of 85 percent low quality Canadian crude, compared with 20 percent before.


Western Canadian Select crude traded at a discount of about $28 a barrel to benchmark West Texas Intermediate crude during the third quarter, compared with $10.50 a barrel in the same period of last year. Booming production north of the border overwhelmed pipeline capacity and the discount widened to a record of $52.4 a barrel in early October.

The WCS-WTI average price gap between July and September was the second widest for any quarter, only trailing the $31.20 a barrel gap of the fourth quarter of 2013, according to data compiled by Bloomberg.

BP said its refineries ran at a utilization rate of 96.3 percent during the third quarter, the highest since 2003. Traditionally, oil companies struggle to run their refineries at more than 90-95 percent at any given time as some units are always down due to planned maintenance and outages.

BP started maintenance on Whiting, about 17 miles southeast of downtown Chicago, in mid-September. The plant, with a capacity to process 413,500 barrels a day, is the largest inland refinery in the U.S. The company plans to wrap up the work in early November.


CANADA FX DEBT-C$ weakens for 3rd straight day as stocks and oil slide

* Canadian dollar dips 0.2 percent against the greenback * Price of U.S. oil falls 0.8 percent * Bond prices trade mixed across the yield curve * Canada-U.S. 2-year spread widens by 1.4 basis points By Fergal Smith TORONTO, Oct 29 (Reuters) - The Canadian dollar weakened for the third consecutive day against its U.S. counterpart on Monday as stocks and oil prices declined, while the greenback broadly climbed. U.S. stocks fell in a volatile session, hurt by fresh worries of an escalation of the U.S.-China trade war and a sharp drop in big tech and internet names. "The Canadian dollar tends to be more risk sensitive, so (I am) not surprised to see it lower," said Erik Nelson, a currency strategist at Wells Fargo. Canada runs a current account deficit and exports many commodities, including oil, so its economy could be hurt if the global flow of trade or capital slows. Oil prices fell after Russia signaled that output will remain high and as concern over the global economy fueled worries about demand for crude. U.S. crude oil futures settled 0.8 percent lower at $67.04 a barrel. The U.S. dollar climbed against a basket of currencies. News that German Chancellor Angela Merkel will not seek re-election as head of her CDU party weighed on the euro. At 4:48 p.m. (2048 GMT), the Canadian dollar was trading 0.2 percent lower at 1.3129 to the greenback, or 76.17 U.S. cents. The currency, which on Friday hit a six-week low intraday at 1.3160, traded in a range of 1.3083 to 1.3149. The loonie got a boost last Wednesday from a Bank of Canada interest rate hike but has lost ground on the three subsequent days of trading. The central bank raised interest rates for the fifth time since July 2017 and said it might speed up the pace of future hikes given that the economy was running at almost full capacity and did not need any stimulus. Speculators have cut bearish bets on the Canadian dollar to the lowest since March, data from the U.S. Commodity Futures Trading Commission and Reuters calculations showed on Friday. As of Oct. 23, net short positions had decreased to 7,228 contracts from 11,019 a week earlier. Canadian government bond prices were mixed across the yield curve, with the two-year up 0.5 Canadian cent to yield 2.264 percent and the 10-year falling 1 Canadian cent to yield 2.396 percent. The gap between Canada's 2-year yield and its U.S. equivalent widened by 1.4 basis points to a spread of 55.8 basis points in favor of the U.S. bond. (Reporting by Fergal Smith Editing by Frances Kerry and Phil Berlowitz)


Province Committed To Health and Safety In Response to Sour Gas Report

A study done by researchers from Harvard and Northeastern University showed air quality indicators were reporting off the chart levels of H2S gas in southeastern Saskatchewan, and there was no action taken by the provincial government. The readings were gathered by the researchers who were working with a collaboration of journalists from various outlets across Canada, and the University of Regina.

The reports and findings presented by the group showed the provincial air quality standards had been breached multiple times since 2014, and no action was taken by the provincial government in response. This includes penalties for companies who are responsible for the emissions.

In a written reply to Discover Weyburn’s questions about the report and the province’s response, the Ministry of Energy and Resources didn’t directly provide a response when asked about the government’s reaction or position to the report. The reply did highlight the province has made a number of steps to strengthen oversight of sour gas management, including increasing inspections, collection gas composition data, increasing staffing levels and funding of air monitoring stations.

H2S is also known as sour gas or hydrogen sulphide. It is a colourless, poisonous gas which is found commonly around crude oil and natural gas production sites. It can be fatal when inhaled. The report presented last week in the media indicated high levels of the gas were found in many areas, which does provide an immediate health risk to some residents of southeastern Saskatchewan.

The statement from the province indicated there had been no need to issue any notices to residents of the air quality reaching critical levels, as the regional air quality levels didn’t reach the point where they would pose a risk to public health and safety. They did state they took action where there were high levels of the gas, and followed up on public complaints related to odours of the gas.

In order to operate a well or facility in Saskatchewan, a company needs to have an emergency response plan in place, which puts the onus on the operator to take steps to notify those at risk of an incident, and to protect safety in the immediate area of the incident, including contacting the Ministry of Energy and Resources when there is an uncontrolled release of sour gas.

While the report from the researchers last week stated there were cases of levels of the gasses high enough to cause corrosion to various items, there were no incident reports available from the individual companies according to the researchers. The province, which monitors incidents to make sure they are dealt with by the operator, said there has been no need for prosecution under The Oil and Gas Conservation Act for failure to follow the reporting procedures. There was no clarification if any companies had their licenses suspended for not following procedure.

In their statement to Discover Weyburn, the government highlighted the regulatory staff respond to all sour gas complaints on a 24/7 basis, and the cases are investigated and corrective actions ordered when necessary, with a commitment to keeping public safety as the number one priority.

No officials from the Ministry of Energy and Resources were available for an interview to clarify or elaborate on any of the responses received in the written statement.

Canadian dollar shakes off plunge in oil as investors brace for rate hike

TORONTO (Reuters) - The Canadian dollar edged higher against its U.S. counterpart on Tuesday as investors maintained bets that the Bank of Canada will hike interest rates on Wednesday even as oil prices plunged.

At 3:43 p.m. (1943 GMT), the Canadian dollar CAD=D4 was trading 0.1 percent higher at 1.3088 to the greenback, or 76.41 U.S. cents.

The currency, which on Friday hit its weakest level in more than five weeks at 1.3132, traded in a narrow range of 1.3082 to 1.3123.

“I think it is in a holding pattern, waiting for the Bank of Canada tomorrow,” said Colin Cieszynski, chief market strategist at SIA Wealth Management.

The central bank, which sees Canada’s economy operating near capacity, has hiked four times since July 2017 to leave its key policy rate at 1.50 percent.

Chances of a rate increase on Wednesday held at more than 90 percent despite further volatility in global equity markets and a sharp drop in the price of oil, one of Canada’s major exports. BOCWATCH


U.S. crude oil futures CLc1 settled 4.2 percent lower at $66.43 a barrel as the sell-off in stocks raised worries about demand growth and after Saudi Arabia said it could supply more crude quickly if needed, easing concerns ahead of U.S. sanctions on Iran.

Canada runs a current account deficit, so its economy could be hurt if the global flow of trade or capital slows.

A deep discount for Canadian heavy crude could explain why the slump in U.S. oil prices had little impact on the loonie, Cieszynski said.

“We didn’t participate as much when (U.S.) oil was going up so therefore we haven’t been getting hit when it goes back down,” he said.

Canadian government bond prices were higher across the yield curve in sympathy with U.S. Treasuries as investors sought safety in low-risk debt.

The two-year CA2YT=RR rose 3.5 Canadian cents to yield 2.277 percent and the 10-year CA10YT=RR climbed 30 Canadian cents to yield 2.449 percent.

The 10-year yield touched its lowest intraday since Sept. 28 at 2.418 percent.

Reporting by Fergal Smith; editing by Jonathan Oatis and Sandra Maler


Canada's Largest Oil Refinery Shut After Diesel Unit Blast

David Marino
October 8, 2018, 8:41 AM CST Updated on October 9, 2018, 3:00 AM CST

Irving Oil Corp.’s refinery in New Brunswick, a major supplier of fuel to the northeastern U.S., was shut after an explosion and fire in a diesel unit.

The hydrotreater, which removes sulfur from diesel to make fuel that meets environmental standards, was in the part of the refinery that was still running, while other units were shut for maintenance that had been planned for this month. Inventories along the East Coast of distillates, which include fuel used to heat homes, are already 15 percent below the five-year average, leaving homeowners vulnerable to higher bills.The market will be waiting to find out “the severity of the damage,” said Thomas Finlon, director of Energy Analytics Group in Wellington, Florida. “If it’s something that is reparable quickly and within the normal measure of scheduled maintenance, it probably won’t change the supply circumstances of gasoline in New York. If it’s of long duration, it could. New York is very well supplied now.”It’s too soon to tell how long the refinery and the unit will be down, Kevin Scott, Irving’s chief refining and supply officer, said in a press conference. Irving is working to minimize any impact on customers, using fuel it has in tanks and reaching out to other suppliers, he said. Four workers were treated for non life-threatening injuries at a local hospital.

Saint John is the biggest Canadian oil refinery, able to process about 300,000 barrels a day of crude. About half of the plant’s fuel is sent to the northeast U.S, making it a key provider of gasoline and diesel to New York and New England. In September, tankers hauled 2.78 million barrels of gasoline, 959,000 barrels of diesel and 119,000 barrels of jet fuel down the coast, according to U.S. Customs import data compiled by Bloomberg.

Gasoline futures on the New York Mercantile Exchange reversed an earlier decline to rise 0.4 percent to $2.0937 a gallon Monday, while diesel gained 0.1 percent to $2.3942.

Ample gasoline stockpiles along the U.S. East Coast may limit the price impact for motorists. Inventories in New England are above the five-year seasonal average, while tanks in New York Harbor are stuffed with the most gasoline for this time of year in U.S. government data stretching back to 1990.

— With assistance by Jessica Summers


Cenovus Signs Oil-by-Rail Deals Amid Canadian Pipeline Pinch

September 26, 2018, 5:11 PM CST Updated on September 27, 2018, 11:03 AM CST

Cenovus Energy Inc. signed deals to transport about 100,000 barrels a day of heavy crude by rail to the U.S. Gulf Coast from Alberta as a pipeline bottleneck depresses Canadian oil prices. The oil-sands producer agreed to three-year deals to ship oil to various destinations along the Gulf of Mexico, according to a statement Wednesday. Canadian National Railway Co. will move the crude from Cenovus’s Bruderheim Energy Terminal starting in the fourth quarter, while Canadian Pacific Railway Ltd. will ship out of USD Partner LP’s terminal in Hardisty beginning in the second quarter of next year.

“Our rail strategy provides a means of mitigating the price impact of pipeline congestion,” Alex Pourbaix, Cenovus chief executive officer, said in the statement. “While we remain confident new pipeline capacity will be constructed, these rail agreements will help get our oil to higher-price markets.”

Slow Train

Crude-by-rail export increases have slowed amid pipeline bottlenecks

The agreements were announced as a surge of new oil-sands production has filled pipelines to capacity. As a result of the bottleneck, Western Canadian Select heavy crude’s discount to West Texas Intermediate futures widened to $36 a barrel on Sept. 14, the most since late 2013. The discount narrowed 50 cents to $34 a barrel at 10:03 a.m. Calgary time on Thursday, data compiled by Bloomberg show. The Cenovus agreements would represent a boost of about 50 percent in crude-by-rail exports out of Canada, based on the most recent data from Canada’s National Energy Board. While Canada’s rail networks have served as a relief valve for transporting oil when pipelines are full, the pickup in crude-by-rail exports has been slow. Shipments out of the country rose one percent in July to over 206,000 barrels a day from June levels, the smallest increase since exports declined in February.

Cenovus said it’s expecting “all-in costs” per barrel to transport the oil from Alberta to the Gulf Coast to be “in the mid-to-high teens” in U.S. dollars. Shares of Cenovus rose as much as 7.8 percent on Thursday.


TSX futures rise as oil hits four-year highs

September 25 (Reuters) - Stock futures pointed to a higher opening for Canada’s main stock index on Tuesday as oil prices touched four-year highs.

Upcoming U.S. sanctions on Iranian crude exports and the apparent reluctance of OPEC and Russia to raise output has pushed crude prices higher.

December futures on the S&P/TSX index were up 0.3 percent at 7:00 a.m. ET.

The Toronto Stock Exchange’s S&P/TSX fell 16.81 points, or 0.10 percent, to 16,207.32 on Monday.

Dow Jones Industrial Average e-mini futures were up 0.32 percent at 7:00 a.m. ET, while S&P 500 e-mini futures were up 0.26 percent and Nasdaq 100 e-mini futures were up 0.17 percent.


As the month-end deadline for North American trade talks nears, Canadian executives who hedge foreign exchange risk have been changing their strategies so their companies can profit from any possible swings in the Canadian dollar.


North American Construction Group Ltd. Canaccord Genuity raises price target to C$14 from C$11

Onex Corp. Canaccord Genuity cuts target price to C$108 from C$111


Gold futures: $1,199.8; +0.2 pct

US crude: $72.51; +0.6 percent

Brent crude: $82.04; +1.03 percent


0900 (approx.) Monthly home price mm for Jul: Prior 0.2 pct

0900 (approx.) Monthly home price yy for Jul: Prior 6.5 pct

0900 (approx.) Monthly Home Price Index for Jul: Prior 264

0900 Caseshiller 20 mm SA for Jul: Expected 0.1 pct; Prior 0.1 pct

0900 Caseshiller 20 mm NSA for Jul: Expected 0.5 pct; Prior 0.5 pct

0900 Caseshiller 20 yy for Jul: Expected 6.2 pct; Prior 6.3 pct

1000 Consumer Confidence for Sep: Expected 132; Prior 133.4

1000 Rich Fed Composite Index for Sep: Prior 24


1000 Rich Fed, Services Index for Sep: Prior 31

1000 Rich Fed Manufacturing Shipments for Sep: Prior 23

1030 (approx.) Texas Service Sector Outlook for Sep: Prior 21.5

1030 (approx.) Dallas Fed Services Revenues for Sep: Prior 21.5

Canadian markets directory ($1 = C$1.29) (Reporting by Nayyar Rasheed in Bengaluru; Editing by Arun Koyyur)


Canada heavy crude discount hits widest level on record

(Reuters) - The Canadian heavy oil differential closed at its widest point on record against the West Texas Intermediate (WTI) benchmark on Monday in thin trade, as transportation constraints continued to weigh.

Western Canada Select (WCS) heavy blend crude for October delivery in Hardisty, Alberta, settled at $42.00 a barrel below the WTI benchmark crude futures CLc1, compared with Friday’s settle of $41.00, according to Shorcan Energy brokers.

Higher production compared with the second quarter has swelled volumes in storage and put pressure on prices, while tight pipeline space and insufficient rail capacity have pushed the differential even wider, say analysts.

Some of the recent price weakness can be attributed to leftover barrels stranded by Canada’s pipeline apportionment system, where shippers nominate a certain volume of barrels but see their shipments reduced if lines are oversubscribed.“Often what we see post-apportionment is simply weak pricing in the aftermarket,” said Matt Murphy, an energy analyst with Tudor, Pickering, Holt & Co.

Murphy noted that rail volumes continue to rise, but still appear to be insufficient to clear the market.

A jump in the global benchmark for crude also weighed on the Canadian prices, with Brent LCOc1 rising 3 percent to a four-year high above $80 a barrel after Saudi Arabia and Russia ruled out any immediate increase in production.

The transportation constraints mean Canadian producers are not able to get their barrels to market, leaving them unable to fully benefit from rising benchmark prices.

Monday’s WCS close surpasses a previous record discount of $41.50 reached in November 2013.

Reporting by Julie Gordon in Vancouver; Editing by Leslie Adler and Matthew Lewis


Oil prices at highest levels in 4 years after OPEC says it won't raise output

Oil prices were at their highest levels since 2014 in trading Monday, after the Organization of Petroleum Exporting Countries decided not to raise output.

In a meeting Sunday in Algiers, OPEC rejected U.S. President Donald Trump's call to open the taps, with both Saudi Arabia and Russia saying they won't produce significantly more oil.

For consumers, that could mean higher gas prices on the way, but it's good news for Canadian oil producers.

On Monday morning, Brent crude, the main European futures contract, rose 3.3 per cent to $81.42 US a barrel at the close of trading. WTI crude, the benchmark North American contract, was up 2.1 per cent at $72.26 US a barrel.

Those are the highest prices since December of 2014, just before oil began its slide that took it down to $40 US a barrel in 2015, discouraging investment in the oil patch.

Oil prices have risen 20 per cent this year alone, pushing up the cost of gasoline and home heating oil. 

JPMorgan predicts they will go even higher, perhaps above $90 US a barrel, in the near term. U.S. sanctions against Iran, the OPEC member that most wants to boost production, take effect Nov. 1 and could further tighten supply.

But Todd Hirsch, chief economist at ATB Financial, says he believes the price spike is short-term and could sink back by the end of the year.

"It's a bit of concern over global supply," he told CBC News. "I don't think it will stay in that range for long."

ATB is projecting an average WTI price of $66 US a barrel in 2018.

But that doesn't mean Canadian oil producers are getting that price for their oil.

Discount for Canadian crude

Western Canada Select, the Canadian oil contract, is also seeing a price jump, up more than $2 to $38.33, but the spread between WCS and WTI price remains wide, at close to $34, because of bottlenecks in getting the oil to market.

A lot of projects in Western Canada invested in expansion over the last few years, in anticipation of higher oil prices, Hirsch said.

The deep discount on Canadian oil is being driven by constraints in moving it to market, he said.

"There's not enough pipeline capacity and a lot of it is moving by rail," Hirsch said. If you can't get it out of the province, it tends to back up."

Mark Oberstoetter, an analyst with Wood Mackenzie in Calgary, said Western Canadian producers are not in a position to respond quickly to an improvement in world oil prices because of the difficulty in getting to market.

"Most of them plan out the next year in the fall and get their contracts in place. When the price rises, they're happy it happened, but there's been less hope because the spreads have widened," he told CBC News.

Wood Mackenzie also predicts the oil price spike will be short-term, but Oberstoetter says the overall increase in prices this year may encourage investment.

At the same time, some producers are pivoting away from gas and increasing their holdings in oil because gas prices have been poor.

On Monday, the Canadian market, which is heavily dependent on the energy sector, responded to the rising prices with optimism, with the TSX up 24 points in the morning. However, by the end of the trading day the TSX was down 17 points at 16,207.

Tariffs weigh on global stocks

Global stocks sank, in part because the U.S. and China officially placed new tariffs on each other's goods, a move that could discourage consumer spending and slow economic growth.

The OPEC governor, Hossein Kazempour Ardebili of Iran, said in comments to Reuters that Saudi Arabia and Russia were unable and unwilling to add more production at short notice.

"They are doing little and late, to get prices higher," he said. "They got prices higher and they are going to get them higher still."

Saudi Arabia successfully negotiated limits on oil production 18 months ago in an effort to get oil prices higher and boost government coffers, which had suffered from an extended period of cheaper oil.

This year the global economy has been expanding strongly, leading to growth in oil consumption and pushing up crude prices.

Trump had demanded OPEC get prices down

On Sept. 20, Trump sent a tweet demanding OPEC produce more to get oil prices down and thus boost the U.S. economy.

"We protect the countries of the Middle East, they would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember. The OPEC monopoly must get prices down now!" he tweeted.

OPEC agreed to produce more earlier this year at Trump's request. However, Saudi Arabia and Russia now say they have no more capacity.

With files from Reuters, Associated Press



Futures rise on higher oil prices, trade fears limit gains

Sept 17 (Reuters) - Stock futures for Canada’s main index rose on Monday as energy shares gained on the back of rising oil prices, but the rise was capped by lingering U.S.-China trade war fears.

Oil rose as investors focused on the impact of U.S. sanctions on Iran despite assurances by Washington that Saudi Arabia, Russia and the United States could together raise output fast enough to offset falling supplies.

Brent crude oil was up 50 cents a barrel at $78.59 by 1055 GMT. U.S. light crude was up 50 cents at $69.49.

China will not be content to only play defence in an escalating trade war with the United States, a widely read Chinese tabloid warned, as U.S. President Donald Trump was expected to announce new tariffs on $200 billion in Chinese goods as early as Monday.

Data on foreign investment in Canadian securities and Canadian investment in foreign securities are due at 08:30 a.m. ET

The Toronto Stock Exchange’s S&P/TSX closed 0.07 percent higher, at 16,013.49 on Friday.

Dow Jones Industrial Average e-mini futures were down 0.07 percent at 7:15 a.m. ET, while S&P 500 e-mini futures were down 0.11 percent and Nasdaq 100 e-mini futures were down 0.16 percent.


Canadian miner RNC Minerals recovered a 43-kg specimen stone containing an estimated 1,100 ounces of gold and a second 7-kg specimen containing 190 ounces from Beta Hunt Mine in Australia.

USD Partners LP has begun expansion work at one of Canada’s largest crude by rail loading terminals, which will boost capacity at the facility by 50 percent and be completed by year end, the head of the company’s Canada unit told Reuters.


Nighthawk Gold Corp: Canaccord Genuity raises rating to speculative buy from hold; raises price target to C$0.60 from C$0.55

Alaris Royalty Corp: CIBC raises price target to C$19 from C$18


Gold futures: $1201; fell 0.01 percent

US crude: $69.53; rose 0.78 percent

Brent crude: $78.72; rose 0.81 percent

LME 3-month copper: $5885.5; fell 1.46 percent

Reporting By Sourav Bose in Bengaluru; Editing by Arun Koyyur



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