Crude Observations

Draft Day

Welcome everyone to the end of April. The time of year when Calgary gets its annual dose of freak snowstorms and patio weather, often in the same day. That’s right, the time of year when you thought it was safe to go back outside for a run or spark a doob on a patio downtown (what? That’s not allowed? That’s stupid) some crazy weather comes along to remind you that it is still in fact winter here notwithstanding the calendar. We are officially in the end of winter doldrums.


Other signs that we are in the doldrums? Ski hills are still open but no one goes. The streets still have about 1000 metric tons of gravel on them. Breakup is in full swing. Governments everywhere seem to be on hiatus. There are no Canadian teams left in the NHL playoffs and, sadly, the NFL Football Regular Season kickoff is still 131 days away.


Fortunately, while Calgary and Alberta don’t have tried and true ways of shaking off these winter blahs, to satisfy die-hard fans like me, the NFL has found a way to engage an enrage its fan base at pretty much the mid-point between the end of one season and the beginning of another.


How do they do this? With the draft. That’s right, the NFL has taken what is in essence a mind-numbing job fair and popularity contest and turn it into a mind-numbing four days of mind-numbing prime-time hype, fake intrigue, breathless storylines and manic punditry as the 32 NFL franchises battle it out to see who can pick the next Joe Montana, Tom Brady or Patrick Mahomes or even the unforgettable Jamarcus Russell or Ryan Leaf – true draft busts who were ranked or picked ahead of such NFL failures as Peyton Manning, Calvin Johnson, Adrian Peterson, Charles Wilson and Randy Moss.


And that’s the beauty of the draft. Sometimes you gotta roll the dice and since you have multiple rounds to screw up, and you get to do it all over again year after year, you can chance a few busts along the way. Because you never know when that lower round pick is going to be a diamond in the rough or the can’t miss pick turns out to be a piece of driftwood. It’s exciting and dull as doornails at the same time. Supported by reams of analysis and scouting reports and, ultimately, a total crap-shoot. Perfect for crazed sports fans.


Anyway, I digress. I am currently in full thrall of what we NFL fans like to call Round 1 withdrawal and Round 2 anticipation. Like seriously, stuck in the middle. Nothing happening. Waiting. Waiting for what I don’t know. Maybe I’m waiting for Godot. Regardless, idle hands. And idle hands get up to no good. Or they start typing weird stuff.


How weird? Well try this on. How about if the world held a draft? Seriously. And what if it was an energy draft? And what if someone covered that draft and reported back on what exactly the heck happened during that draft?


So here goes.


The Global Energy League Draft of 2019.


OK, a few ground rules, for the purposes of this draft there are only 10 teams, the others are all in some minor league or other entity like the XFL. The draft will take place in typical inverse order, so if you had the weakest record in the last year, you get to pick first. This means the best picks last. Trades of course are allowed and occasionally happen. As an analogy for global energy politics, it has to make at least a little bit of sense and clearly, if Russia isn’t portrayed a evil, then what’s the point?



Alright, here comes honorary commissioner of the league Don Cherry to announce that the team with the number one pick in the Energy Draft is up and has ten minutes to make its pick.


“Canada is officially on the clock and the draft is on”


Canada – first pick overall! Very exciting, right? Canada has the first pick which means… They were the worst performer of everyone. Not a big reason to celebrate, right? Maybe if they pick the consensus number one, but if they screw it up…


Last Season. The last season for Canada was nothing short of hopeless on the energy front. The country started relatively strong but faded fast as the year went on. They made an expensive free agent acquisition in TransMountain only to see that asset completely underperform and suffer a season ending injury. Finished the season on a record shattering losing streak, scoring no points in the latter half of the year while being mercilessly lapped by the competition and ultimately having to gut its roster amidst scandal, firings and questionable decision making.


Needs: Everything. Seriously. OK, maybe not that seriously but there are glaring holes in this lineup that Coach Trudeau needs to address to attract more potential free agents coming out in the next few years in LNG.


The Pick. This one is really no surprise. The consensus number one pick in the draft has always been staring any team in Canada right in the face. They need to protect and get the best performance out of their most prized assets and the only way to do that is solidify the regulatory system into a more user and investor friendly one. So Canada picks regulatory reform and certainty. Some consternation when the pick chose to wear 69 on their jersey, but let’s wait and see.


Pick Number 2 goes to the United States of America courtesy of a trade with Venezuela who swapped their number 2 overall pick for the United States 9th overall pick and Donald Trump Jr. in a salary cap move.


Last Season: The United States came in second in the league last year, almost beating out Saudi Arabia. They got great production out of their energy assets and with limitless funds and an ownership group that seems like it doesn’t understand restraint or salary caps, the lineup is constantly filled with pricey free-agent acquisitions, divas and is a lot of flash over substance, like last year’s #1 overall pick Permamia. That said, when they play – watch out!


Needs: The media and analyst community is pretty much all in agreement that what the United States needs in this draft is a little restraint in production, that maybe they can actually finally emerge victorious by slowing themselves down a bit.


The Pick. True to form, the United States ignores the advice of the punditocracy and instead doubles down on what they already have, selecting a highly rated but mercurial Texan Pipeline. This pipeline, along with others selected previously, should finally crack the starting lineup this year, hopefully allowing some running lanes for the stacked Light Tight Oil backfield.


Picks number 3 and 4 this year both go to Alberta. The number 3 pick is “earned” thanks to Alberta’s lousy record the past season while the number 4 overall pick is a compensatory pick from Canada that the league is forcing them to pay for cheating in an epic matchup where TransMountain tripped up Alberta’s Carbon Tax, leading to TransMountain’s suspension and the collapse of Alberta’s secret weapon – being the fifth largest producer of oil in the world.


Last Season: Compounded by the epic cheating scandal with Canada, last season was an unmitigated disaster for Alberta. Overloaded with newfangled strategies such as Carbon Taxes, emissions caps and social license, Alberta was taught a very valuable lesson in energy world realpolitik. The basics work. Have a strong ground game, play by the rules and don’t make assumptions about your competition and you will be competitive week after week. Start to muck around with the basics and try to outthink the opposition? You are done.


Needs: Many. With TransMountain on the Canada roster, Alberta needs to somehow match that pipeline strength with some of its own. It also needs to understand the division it competes in, having the powerhouse US as a perennial power and also contending with the pesky, upstart BC team. New coach Jason Kenney has his hands full on this one after replacing Rachel Notley who left behind no scouting reports at all on the draft options.


Pick #3: With this pick, Alberta went the safe route and chose to bulk up its defence, and who can blame them after the manhandling they have suffered the last few years. The pick is Bill 12, otherwise known as Billy Tap Turner. It remains to be seen if he can play once the regular season starts, but it’s a bold choice worth trying. Particularly given how pesky BC is.


Pick #4: With this pick Alberta is faced with a conundrum. Do you pick a pipeline and hope it pans out? More defence? A Quebec emissary? Ultimately this pick came down to the wire and with time almost expiring to make the call, Alberta and coach Kenney chose a plucky upstart called Hybrid Crude by Rail. Unlike his predecessor, Coach Kenney isn’t keen on that type of player, but decided to roll the dice on a prospect that fills a glaring need and doesn’t come with the big money baggage that the Notley Crude by Rail strategy had.


The 5th overall pick in this draft belongs to Russia, who finished in the middle of the pack, notwithstanding being competitive and relevant in every match last season.


Last Season: Led by Vlad the Impaler Putin, the Russian Bears trampled roughshod over pretty much everyone they faced last season yet somehow emerged with a .500 record, barely made the playoffs and were bounced early. Even widespread cheating and intimidation did little to help.


Needs: It is hard to say what the Russians need at this point. Their energy team is very balanced and requires very little tinkering. In true Belichikian fashion they are said to have spies everywhere, able to manipulate teams and players to an unprecedented degree, belying their economic impact. If pressed, it would appear that Russia’s two biggest issues appear to be some cracks in team chemistry between Putin the Coach/GM/President and Chief Play Caller and the extremely well-paid minions/stars he has toiling away for him and the general disdain that the Russian team seems to have for the environment (they do spill a lot no matter where they go or how they get there).


Pick: To no one’s surprise, the Russians decided that they would cheat and pick up multiple players with their one and only draft pick. First, Putin purged all his energy assets of their respective captains and put in new, slightly less well-played but completely loyal replacements. Then, in typical subversive, sneaky, Russian fashion, they colluded with the United States team to obstruct the next team’s draft choice from happening.


The 6th overall pick in this draft belonged to Iran and for the longest time, it was radio silence as they searched for their scouting notes, a list of available choices and a video-feed that wasn’t in Russian.


Last Season: Iran was riding high last season until they faced off against the United States juggernaut and it all came tragically apart soon after that. It was one debacle after another as they found themselves hemmed in with nowhere to send their energy. They tried to act tougher than they were and thought they had an out when China and others kept supporting them, but it didn’t last.


Needs: For Iran, it’s pretty simple. They have some of the best assets in the energy league outside of Saudi Arabia but no way to properly use them.


Pick: In an inspired twist, the Iranians were able to dig up an electronic transfer payment system that completely bypasses the US $ dominated ones currently in use and is hopeful of a rebound season as it trades product and players with the powerhouse Chinese team which needs this US divisional foe to administer some blows. China and Iran agree to a low level third round swap of ambassadors to keep things moving forward.


The 7th overall pick went to upstart BC who were a surprise finisher in the energy top 10, mostly thanks to a fortunate accident of geography (many ports).


Last Season: Although they started off weak last season the British Columbia team finished strong with their emerging superstar LNG, who they almost kept in the minor leagues too long. The strength of LNG and the drilling sector proved enough to offset the fundamental weaknesses they have in both leadership and overall strategy as well as a consuming sector over-exposed to the whims of both a rejuvenated Alberta squad and the fact that their Vancouver contingent is clearly over the salary cap.


Needs: The BC team needs to shed cost. They are paying the highest prices going for fuel and it isn’t going away anytime soon. Blessed with a West Coast offense that should see them score points every time they tough the energy ball, they are quarterbacked by John Horgan who seems to have a bad case of fumblitis. They are in desperate need of someone who can protect the QB from the rabid Alberta pash rush.


Pick: Reluctantly, after considering all the options and taking a good luck at the draft board, the BC team does the smart thing and relies on the tried and true strategy – don’t draft for position, take the best player available and thus they choose TransMoutain Expansion. This will allow them to create cap space by getting rid of high-priced “gas prices” and offset the impact of Alberta drafting Bill 12.


The 8th overall pick belonged to China, one of the surprise leaders last season, especially when one considers they are primarily a consumer and not producer of energy.


Last Season: Finishing third in the league last year was something of a major accomplishment for a talented and disciplined Chinese squad. They dominated the energy league by building up massive reserves, satisfying demand by being open to trades with anyone who had a viable option for them and not being intimidated whatsoever by the bluster emanating primarily from the United States squad.


Needs: With strength at virtually every position, the Chinese entry has no glaring needs so they are free to draft strategically. In the current league incarnation, the real rivalry for the Chinese team is the United States so whatever they do will be influenced by that. Accordingly, the Chinese select Foreign Direct Investment as their newest weapon. This will allow them to invest around the world, particularly in energy and resource-rich but economically challenged areas such as Africa and South America. By pursuing this goal, the Chinese are gradually supplanting the United States as the go-to development partner.


As you recall from earlier, Venezuela traded down with the United States in the draft, inexplicably picking up Donald Trump Jr on the way. At any rate, they pick 9th.


Last Season: This past season was an unmitigated disaster for Venezuela. They started weak and got weaker with production falling from beginning to end. The only thing that kept them from utter collapse was financial support from both Russia and China and a refusal to pay their players. A couple of early season fluke wins (the other teams failed to show) kept them from just disappearing.


Needs: Everything. Up and down the board. They don’t even have a medical staff. What they do have is massive potential in their reserves. While the mystery trade for Don Jr. seemed to imply a desire to replace their incompetent General Manager Maduro, the actual reason revealed itself when the announced their selection of Russian Money as their pick. This caused the rest of the league to sit up and pay attention. Maybe team Venezuela isn’t going away as quickly as everyone thought. As long as the players don’t revolt.


The 10th and last pick of the draft belonged to Saudi Arabia, the perennial favourite and founder of this league and its onetime rival league OPEC.


Last season: As always, Saudi Arabia started out as the favourite, won the most games, dominated the headlines, the stat sheets, the press, talk radio, the playoffs – you name it. They won the season going away and easily locked down the championship. They are the perennial favourite and this coming year will be no different.  They don’t even have cheating scandals to hang around their necks.


Needs: Absolutely none. How do we know that? Well, just prior to the draft they elected to show the rest of the league exactly how strong and deep they were by letting everyone see their books, scouting reports on players and any other information. And aside from noting that their most valuable player (the Ghawar Field) has seen production decline a bit, it was about as impressive a reveal as you could have.


The Pick. This one is interesting, because they really don’t need to make one. There is no weakness on their roster. Their farm teams are stacked, they have a massive cost advantage. In fact, there is only one area where they have previously elected not to compete with the rest of the league. So true to form, they drafted some LNG as an experimental project. Expect them to dominate this space soon. It’s just the way the Saudis operate. BC better act fast.


OK, there you have it. An awkward energy draft.


Before I leave this flea-bitten, beaten to death analogy, I have to acknowledge Mr. Irrelevant, the name traditionally bestowed on the last pick of the last round of the draft. It’s a terrible thing to call a kid who just is happy to be picked and there are tons of free-agent walk-ons that weren’t drafted either so technically are even more irrelevant, but I need to do one here.


So, with pick number #60, in the 6th round of the draft, Canada decided to pick, purely as a flyer, economic sanity. Maybe it’ll stick. Not sure. Like all draft picks – you just have to wait and see.


OK, now some relevant commentary. And what is likely to grow into a full-on rant in the next while:


A Request from all of us peons to the Alien Overlords who appear to inhabit Ottawa regarding the TransMountain Expansion.


Please. Stop talking about it. You are just making everyone angrier. Make your incompetent energy minster stop talking about it. He’s fanning the flames. Don’t engage in discussions about it. You’re making the investment community frightened. Keep your stupid politics out of it. Don’t count votes around it. Just get the job done and have your vote on June 18. You don’t need any more time.


Have some cojones and DO YOUR JOB.


Here’s how decision making works in the real world. You have a decision to make. You make it.


Look, I get the politics and the constituencies you have to please.


If you approve it you will lose votes. If you delay it you will lose votes. If you deny it you will lose votes, you most certainly will trigger a constitutional crisis and you might even lose Alberta.


It is guaranteed that under any scenario, your government is at risk, but it already is for so many other reasons.


But this thing, this symbol, this project – it is important, to all of the country.


Delaying this decision and playing politics like now appears to be happening does nothing except pander to a  constituency of narrow special interests that I can unequivocally guarantee to you do NOT have the interests of “good-paying, middle class job holding, hard-working regular Canadians” in mind, never mind your interests – they are in it for themselves.


If you really care about the middle class, act like it. Have your Cabinet vote and get on with it. Anything else is pure cynical and crass politics. Did the SNC scandal teach you nothing?


Prices as at April 26 (April 19), 2019 

  • The price of oil was up this week on modest production gains and Iran supply concerns before dropping on Trump tweets.
    • Storage posted an increase
    • Production was up
    • The rig count in the US was down
  • Injections to storage were flat with expectations for gas. The market was unmoved
  • WTI Crude: $62.86 ($63.98)
  • Western Canada Select: $50.38 ($53.38)
  • AECO Spot *: $0.38 ($0.60)
  • NYMEX Gas: $2.548 ($2.488)
  • US/Canadian Dollar: $0.7425 ($0.7484)


  • As at April 19, 2019, US crude oil supplies were at 460.6 million barrels, an decrease of 5.4 million barrels from the previous week and 30.9 million barrels above last year.
    • The number of days oil supply in storage is 28.5 compared to 25.5 last year at this time.
    • Production was up[for the week at 12.200 million barrels per day. Production last year at the same time was 10.586 million barrels per day.
    • Imports fell from 5.992 million barrels to 7.149 million barrels per day compared to 8.469 million barrels per day last year.
    • Exports from the US rose to 2.681 million barrels per day from 2.401 million barrels per day last week compared to 2.331 million barrels per day a year ago
    • Canadian exports to the US were 3.669 million barrels a day, down from 3.396
    • Refinery inputs rose during the during the week to 16.583 million barrels per day
  • As at April 19, 2019, US natural gas in storage was 1.339 billion cubic feet (Bcf), which is about 22% lower than the 5-year average and about 4% less than last year’s level, following an implied net injection of 92 Bcf during the report week
    • Overall U.S. natural gas consumption down 7% during the report week
    • Production for the week was flat. Imports from Canada decreased 4% from the week before. Exports to Mexico decreased 11% because of pipeline maintenance
    • LNG exports totaled 14.9 Bcf
  • As of April 25, 2019, the Canadian rig count was down at 63 (AB – 46; BC – 14; SK – 1; MB – 0; Other – 2). Rig count for the same period last year was 90.
  • US Onshore Oil rig count at April 26, 2019 is at 805, down 20 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States was down 1 at 186.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count was down 2 at 21.
    • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 68%/32%


Trump Watch: Trump called OPEC…

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