As the semi-malaise continues to shroud the Saskatchewan and Alberta oil industries, one has to retain an optimistic attitude while grasping at any sign of improvement in the patch.
In recent weeks, European oil market analysts have been stating emphatically that oil prices will rebound, and with West Texas Intermediate prices lingering between the $50 to $62 per barrel range for the past few months, we have a tendency to agree.
The fact southern Saskatchewan yields conventional oil, should be working in our favour, if not now, eventually.
The shale, oil sands, biofuels and liquefied natural gases are more expensive to get to and transfer and are generally used for heating fuels when refined. Transportation fuels best come from the kind of oil we dig out around here.
Electric cars may be the wave of the future, but with only five of them licensed in Saskatchewan’s capital city, their date of arrival as a tour de force in the transportation game still appears as a small dot on the horizon.
The oil analysts who are monitoring their regions as well as the Middle East are now saying even Saudi Arabia is beginning to feel the pinch and will definitely be looking for higher rates of return within the next seven to nine months.
Most of the old OPEC nations need oil to come in at over $70 a barrel in any market framework. If they don’t get to that price range, only a few are capable of making a profit thanks to the new era of infrastructure that has been built up over the industry during the past decade. It seems even the most efficient producers can’t make money on $40 oil in 2015.
The less efficient producers such as Iran, Nigeria and Venezuela, need oil to top the $110 level before they’ll show any profits since they have much larger production costs, political interference and less efficient operators.
The Saudis, they say, would like to see oil at just under $100, but can turn a profit at today’s prices, if they monitor their business plans closely. Saudi Arabia has turned on the oil taps of late in a bold attempt to retain control of the global market. At 11 million barrels per day, they might possibly do it. They have a desire to keep Iran, Russia and the Alberta oil sands in checkmate positions, and to do that, they must dominate the flow lines. They no longer want to be the protector of higher prices, willing to adjust their volume to accommodate others.
The slightly lesser Middle East players such as Kuwait, Qatar, and United Arab Emirates, the monitoring agencies say, are more efficient than the Saudis. They can definitely turn profits on $60 to $70 oil, but only if they work to maximum efficiency. But, they too, aren’t that happy, having enjoyed the $100 plus regime.
So while Canadian producers wait for the second sign of life in the oil industry, we could turn our attention to forging out some long-term plans, which would include some sort of resolution to ongoing pipeline delivery and rail delivery systems, hammering out contract agreements with First Nations and determining what we’re going to do with LNG developments.
There could be a six to nine-month window of opportunity for our industrial leaders to get their ducks lined up for the next round of price improvements.
We’ve seen the bleak side of $40 oil drop by the wayside and have welcomed the somewhat unsteady climb back up to the $50 and $60 range.
When it hits $75 will we be ready?Â
