Canadian Oil Sands Sees Continued Volatility in Light Oil Pricing

By Krugel, Lauren | The Canadian Press, November 30, 2012 | Go to article overview

Canadian Oil Sands Sees Continued Volatility in Light Oil Pricing


Krugel, Lauren, The Canadian Press


Canadian Oil Sands sees light oil volatility

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CALGARY - Growing North American light oil production is expected to cause crude from the Syncrude oilsands mine to fetch a discounted price, says Canadian Oil Sands Ltd., the largest partner in the massive development.

The company's 2013 outlook released late Thursday predicts its synthetic crude -- light oil that has been upgraded from tarry oilsands bitumen -- to get a price US$5 lower than West Texas Intermediate, a key U.S. light oil benchmark.

Canadian Oil Sands expects WTI to average US$85 per barrel next year. In the past, WTI and light synthetic crude have been relatively close in value.

"It's an area where we probably have the least science behind our predictions, so we've tried to be conservative," Canadian Oil Sands CEO Marcel Coutu said on a conference call with analysts Friday to discuss the company's budget and outlook for next year.

U.S. oil production has been rising from so-called "tight" reservoirs in places like North Dakota that had until recently been too technically challenging to exploit.

"There is more light oil coming into the refinery market in North America. There's no doubt about that," said Coutu, adding much of that crude is making its way to market by rail in the absence of adequate pipeline capacity.

"So I think that we will continue to have a discount for light product... and that is why we've put down this average $5 discount against what has been really a closer-to-par pricing for our product up to this point."

A report by the International Energy Agency earlier this month predicted the United States will be virtually energy self-sufficient by 2035, thanks in large part to booming light oil volumes.

Oilsands giant Suncor (TSX:SU) said recently that the economics of its Voyageur upgrader -- which would upgrade its oilsands bitumen into synthetic oil in much the same way Syncrude does -- are "challenged" as a result of growing U.S. light oil production.

There are pipeline proposals in the works to send more western crude eastward, where refineries would rather buy domestic oil than import it from overseas at a higher price. …

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