Coronavirus Dents the Gradual Pick-Up in Canada’s Oil and Gas
In the collation by Canada Energy Regulator, the declaration of a state of emergency in the community health sector caused acute industry difficulty and this was observed in the current report of the Canadian rail oil exports to the United States. The commencement of oil and gas drilling in Canada is gradually picking up but still on the low due to the negative impact of the Coronavirus almost grinding work to an absolute stop. In June, only 18 rigs were announced to be functional; however, this week, the Canadian Association of Oilwell Drilling Contractors announced rigs in full operation as follows: 3 in Saskatchewan, 8 in British Columbia, 31 in Alberta, making 42 rigs now in operation. Nevertheless, this progression in figure total is just a third of the Canadian Association of Oilwell Drilling Contractors’ prediction last year for a 3Q2020 mean of 125.
Canada’s extraterritorial rail oil cargo fell by 86% to a mean of 58,048 barrel per day in June from 411,991 in February, which turned out to be the last month of peak sales before the pandemic hit North America. According to market documentation published by the Petroleum Services Association of Canada, the pricing of natural gas has been the glory in the Canadian industry. Up till now, gas cannot compete at par before a pipeline levy rectification compressed the market for Alberta and BC production. Canadian gas presently sells at close to C$1.90-2.00/MMBtu ($1.42-1.50), relatively over four times more than the lowest hard time hit at C40-50 cents one year ago.
Due to the demand for variance in quality and consideration of distance to refineries, Canadian oil continues to trail prices of the United States. Canadian light oil is presently sold at US$37-38.50/bbl, it is lower by nearly $15 since July 2019. The yardstick for Western Canada Select, heavy and bitumen grades is US$31-32, less by $9.00-10.00 also from last year.