Opportunity Crudes

As a result of the collapse in oil prices, oil production in Western Canada during May reportedly fell by as much as 1MM b/d (20%) from levels earlier in the year.

It is a continuation of last week's story focusing on US shale oil also called light tight oil (LTO).

Both US shale oil also called light tight oil (LTO) and Canadian oilsands bitumen are considered opportunity crudes or price-advantaged crudes because they are often traded at a discount to conventional oil due to their quality.

Venezuelan oil production has now fallen to 100-200K b/d, with further output reduction expected as US sanctions continue to hinder the ability of the country to export oil, leading domestic storage capacity to fill and forcing output to be halted until these stocks can be drawn down.

Even though oilsands output is expected to fall by around 175K b/d this year from 2019 levels due to the oil price and demand rout caused by COVID-19, IHS Markit is forecasting oilsands output to grow by about 1.1MM b/d from current levels to nearly 3.8MM b/d by 2030.

According to North American pipeline company Enbridge, liquid volumes sent through its Mainline system, which transports crude from Alberta, Canada through the US Midwest and ultimately to the US Gulf Coast, were 14% lower on the quarter at 2.44MM b/d in 2Q.

Some shut-in oilsands output is beginning to come back online amid rising oil demand and prices around the world.

With demand recovering from the depths hit in the throes of the COVID-19 crisis, producing nations are expecting to reap better prices for their crudes, especially medium- and heavy-sour crudes that have seen supplies tighten due to the OPEC+ cuts, the collapse of Venezuela's oil industry, and the US sanctions on Iran.

At the start of this month, crude production from the South American nation fell to around 300K b/d, with no oil rigs operating in the country, according to a series of internal operation reports from PDVSA.

Canadian pipeline operator Enbridge was ordered to shut down Line 5, which travels from Western Canada to Eastern Canada and various hubs in the US and has a segment traversing the Straits of Mackinac.