Although it isn’t exactly in the money, Alberta’s treasury can take comfort that world oil prices are back above the provincial government’s breakeven point on strengthening fundamentals..North American benchmark West Texas Intermediate was up about a buck on Tuesday to US$79.64, the highest since April..Even more important, Alberta’s signature Western Canadian Select (WCS) cocktail of heavy crudes was up more than 2% to $61.87, dragging the entire Canadian crude complex with it..The light-heavy differential at the main US trading terminal in Cushing, Oklahoma — net of pipeline costs — was just $5.98 or about 7%..About 70% of Alberta’s resource revenue is pegged to the price of WCS. Every dollar up or down is worth a billion to provincial coffers..That’s good news for the UCP government which is banking on a US oil price of about US$79 to balance the books and post a modest surplus after ambitious spending promises in the May election. In that regard, the stars are starting to align..Canadian oil is priced in US dollars but sold in Canadian currency, which was up after the Bank of Canada forecast stronger economic growth of almost 1% on Monday, compared to a previous 0.1% contraction forecast for 2023..Because Alberta’s oil producers are price takers, not price makers, global developments always have an outsized impact on what happens here at home..In that respect world oil prices are firming on rising optimism for Chinese demand as OPEC supply cuts kick in and the US starts refilling its Strategic Petroleum Reserves after draining them for more than a year and a half. The latter is particularly bullish for Canadian crudes in the country’s largest export market in the Gulf Coast..Likewise, Indian oil demand was up 5% in June, surpassing OPEC’s own demand forecast numbers of about 2%. .Recession fears — the main drag on oil prices — were starting to wane. The International Monetary Fund on Tuesday increased its 2023 global growth estimates up to 3% from 2.5% in April, which would suggest even higher energy demand numbers..It comes amid signs sanctions on Russia’s oil production were beginning to take hold, as a lack of investment from Western oil majors bites into strongman Vladimir Putin’s ability to fund his government’s books and the war in Ukraine. Consequently, Russian oil exports are the lowest since February..Indeed, Goldman Sachs predicted record high demand numbers will push oil prices higher in the near term. The US financial house increased its 2023 outlook up by $6 to $86 in the second half of this year..“We expect pretty sizable deficits in the second half with deficits of almost two million barrels per day in the third quarter as demand reaches an all-time high,” Goldman’s head of oil research Daan Struyven told CNBC..Much to Ottawa’s chagrin — and Alberta’s benefit — energy ministers at the G20 summit in India failed to reach agreement on curbing fossil fuel emissions, failing to even agree on whether a joint communique should stipulate a “phase down” of “unabated” fossil fuels, “in line with different national circumstances.”.There was also disagreement on the role of carbon capture technology in reducing emissions. According to trade publication Argus there was also disagreement on developed countries pledging $100 billion per year to 2025 to mitigate emissions..The failure to agree clouds the outlook for the COP 28 summit in Dubai this fall, which can’t be good news for Canada’s Environment and Climate Change Minister Steven Guilbeault, who jetted off to India this morning for a meeting of environment ministers later this week.
Although it isn’t exactly in the money, Alberta’s treasury can take comfort that world oil prices are back above the provincial government’s breakeven point on strengthening fundamentals..North American benchmark West Texas Intermediate was up about a buck on Tuesday to US$79.64, the highest since April..Even more important, Alberta’s signature Western Canadian Select (WCS) cocktail of heavy crudes was up more than 2% to $61.87, dragging the entire Canadian crude complex with it..The light-heavy differential at the main US trading terminal in Cushing, Oklahoma — net of pipeline costs — was just $5.98 or about 7%..About 70% of Alberta’s resource revenue is pegged to the price of WCS. Every dollar up or down is worth a billion to provincial coffers..That’s good news for the UCP government which is banking on a US oil price of about US$79 to balance the books and post a modest surplus after ambitious spending promises in the May election. In that regard, the stars are starting to align..Canadian oil is priced in US dollars but sold in Canadian currency, which was up after the Bank of Canada forecast stronger economic growth of almost 1% on Monday, compared to a previous 0.1% contraction forecast for 2023..Because Alberta’s oil producers are price takers, not price makers, global developments always have an outsized impact on what happens here at home..In that respect world oil prices are firming on rising optimism for Chinese demand as OPEC supply cuts kick in and the US starts refilling its Strategic Petroleum Reserves after draining them for more than a year and a half. The latter is particularly bullish for Canadian crudes in the country’s largest export market in the Gulf Coast..Likewise, Indian oil demand was up 5% in June, surpassing OPEC’s own demand forecast numbers of about 2%. .Recession fears — the main drag on oil prices — were starting to wane. The International Monetary Fund on Tuesday increased its 2023 global growth estimates up to 3% from 2.5% in April, which would suggest even higher energy demand numbers..It comes amid signs sanctions on Russia’s oil production were beginning to take hold, as a lack of investment from Western oil majors bites into strongman Vladimir Putin’s ability to fund his government’s books and the war in Ukraine. Consequently, Russian oil exports are the lowest since February..Indeed, Goldman Sachs predicted record high demand numbers will push oil prices higher in the near term. The US financial house increased its 2023 outlook up by $6 to $86 in the second half of this year..“We expect pretty sizable deficits in the second half with deficits of almost two million barrels per day in the third quarter as demand reaches an all-time high,” Goldman’s head of oil research Daan Struyven told CNBC..Much to Ottawa’s chagrin — and Alberta’s benefit — energy ministers at the G20 summit in India failed to reach agreement on curbing fossil fuel emissions, failing to even agree on whether a joint communique should stipulate a “phase down” of “unabated” fossil fuels, “in line with different national circumstances.”.There was also disagreement on the role of carbon capture technology in reducing emissions. According to trade publication Argus there was also disagreement on developed countries pledging $100 billion per year to 2025 to mitigate emissions..The failure to agree clouds the outlook for the COP 28 summit in Dubai this fall, which can’t be good news for Canada’s Environment and Climate Change Minister Steven Guilbeault, who jetted off to India this morning for a meeting of environment ministers later this week.
