Crude Observations

Look – A Turkey!

Here I sit on a fabulous Friday, watching what few leaves remain on the trees out my office window turn yellow and fly away, contemplating the state of the world and preparing to head home for the long weekend celebration of Canadian Thanksgiving. For my American readers, we do our Thanksgiving early, mainly because all the crops are in by mid-October and it’s about to get super-dee-duper cold.


OK – elephant in the room first. I know the expectation is for a monumental rant about TransCanada’s decision to scrap the Energy East Pipeline but I just can’t do it. I’m tired of it. It’s too much. Plus, there is no shortage of pundits putting all the nails in that coffin. On top of that, I did my rant a few weeks ago and you know what? Nothing has changed. We all knew it was coming then, this is just confirmation. And don’t listen to the obfuscators and deflectors who say “it was for business reasons” or “low oil prices” or whatever. The regulatory overkill and delay and uncertainty played a MAJOR part. You know why? Because the regulatory environment in which you operate informs your “business” decisions. If you can’t with certainty know you are going to be able to do what you plan to do, no amount of spreadsheets and pricing and profitability models are going to make you pursue that project. Period.


So with that out the way, what is left to write about? Plenty, I think. Now this may be a recycled and hackneyed theme, but it is a Thanksgiving tradition in many families to torture the kids (who just want to mainline cranberry sauce) and go around the dinner table before actually eating anything to give everyone a chance to say what they are thankful for.


In that spirit, I thought I should do the same and write about some of the things I am thankful for (and some I’m not). I could also be that unlike the dinner table some will have genuine sentiment but most will no doubt be decidedly tongue in cheek, if not foot in mouth.


Overall, as I look back on the past year or so of natural disasters, global aggression, increasing levels of terrorism in the “first world”, senseless violence perpetrated on innocent civilians and bystanders, economic catastrophes unfolding around the world, I’m pretty darn thankful to live in sleepy old boring Canada. Don’t get me wrong, we have our issues here and the weather sucks, but when one of the biggest stories of the past week was the government changing (and then flip-flopping) the law on paddling a canoe while drunk, you know we’ve got our priorities right where they belong.


I am thankful that notwithstanding massive amounts of sabre-rattling around the globe the only real war being waged is the Twitter war between Donald Trump and the NFL, and NFL players, and Kim Jong Un, and Little Rocket Man (oops, same guy!) and Hilary Clinton (still!) and all of Puerto Rico.


I am thankful to Finance Minister Bill Morneau for introducing a series of disastrous small business tax policies designed to take a pile-driver to a pushpin. Why you ask? Because as a result we are now engaged in a meaningful dialogue about taxes in our country and have finally galvanized the business community to stand up for itself against near constant demonization. Plus, the cynical way it was rolled out under the cover of July weather with a joke of a consultation period and an intractable painful defence has exposed the hypocrisy of the government in a way that other shambolic policy ideas have failed to do. This type of government by tone-deaf fiat will be remembered for a long time.


I am thankful that the Calgary economy seems to have stabilized after absorbing the massive energy downturn and that the downtown office market has steadied itself.


OK, back to the elephant in the room for a bit. I am actually thankful to TransCanada for calling the Federal government out by taking a $1 billion hit and cancelling their Energy East pipeline project application. While the decision is the right economic one given short and medium term forecasts for production growth in Western Canada and the likelihood of Keystone XL actually happening providing ample takeaway capacity, the cancellation rightly turns the political spotlight back on the Liberal government’s inability to stop farting around with the regulatory process and environmental assessments. As stated here previously, we used to be a country that got things done in industry and infrastructure, now we can’t get out of our own way. By cancelling this massive project and refusing to waste money and play along with the Liberal government’s sham of a regulatory process, TransCanada has guaranteed the heat will remain on the government to a) make damn sure TransMountain happens; and b) pay attention to the energy sector or risk having Canada’s attraction as an investment destination permanently damaged.


That said, notwithstanding the preceding, I am thankful for stable and sane government. As bad as the various provincial and federal governments are and as much as the leaders make me want to rage like a crazed, barking madman, it is not hard to find evidence of much worse situations around the world.


I am thankful for Donald Trump, because the nuthouse he is running is a non-stop source of entertainment and hilarity. I’m not thankful for anti-trade rhetoric, dog whistle appeals to racist dogma, the near constant state of conflict, the mysoginy and the prospect of global thermonuclear war, but hey – everyone’s got a few flaws, right? As long as the entertainment continues, who cares!


I am thankful to Sirius XM for the Beatles Channel. Seriously. I love the Beatles. Can’t get enough. I don’t care who knows it. I am also thankful my daughter Lucy won’t let me turn off the car while a Beatles song is playing (I told her it’s an actual rule).


I am thankful for $50 (ish) oil and a recovering energy sector. Mostly because the energy sector is where I make me moneys, but also because a recovering energy market is good for everyone in Canada.


I am thankful to see pricing power start to recover in the energy services world, where profits and margin have been hard to come by in recent years.


I am thankful to see that Russia and Saudi Arabia are cozying up and trying to bury the hatchet on decades of frosty relations. Hmm, 20% of the world’s oil supply making nice with each other – one a US rival and the other the American’s top ally in the Middle East – what could possibly go wrong?


I am thankful for at the very least a steady and cheap natural gas pricing environment, not too hot and not too cold. Why – aren’t higher prices desirable? Yes and no. Higher prices are always good, but let’s keep them below $4.00 for a little while longer. This will allow more and more power and export oriented infrastructure to be built in the United States such that when the supply crunch comes, as it inevitably will, Canadian gas will be there to fill the gap. It’s coming, we just don’t know it yet.


On a local basis, I am thankful that the Calgary civic election (spoiler alert – Nenshi wins) and the election of the new leader of the United Conservative Party (spoiler alert – it’s going to be Jason Kenney) are soon going to be over, especially the UCP one, do you know how many campaign emails I receive a day? It’s flipping exhausting.


I am thankful for zombies. I mean who isn’t. And I’m including the ones in government in that as well.


I am thankful for NFL football, if only because the god-awful Bills are in first place in the AFC East, ahead of presumptive Super Bowl winner New England.


I am also thankful for Gary Bettman, NHL commissioner, who decided to interfere in Calgary’s municipal election by participating in a new hockey barn tit for tat and trying to strong arm a very popular mayor into a decidedly unpopular decision. Here’s a hint Gary – an arena will happen, but you need to shut your yap, nobody likes that game. Your 20 minute fly-by and threaten routine ain’t gonna ruffle the feathers of a populace that has gone through a brutal three-year downturn and eats multi-billion dollar mega-projects cancellations for lunc and has a private sector that on pretty much everything pays its own way. Gary – move on, we’ve got this.


I am thankful that my government thinks that I am a fat cat and a tax cheat. Why? Because it makes me feel important that dedicated, unconflicted and high-minded servants of the people like Bill Morneau and Justin Trudeau can take enough time out of counting their trust fund millions to take an active role in ensuring that I pay my “fair share” of taxes while still protecting the “middle class” whoever and wherever they are (presumably the thousands of workers who might work on a project like, say, Energy East). Where else in the world can you get such personal attention from the government? It makes me feel important.


Mostly and above all else, I am thankful for my family, both my immediate nuclear family as well as my extended family – in-laws and out-laws and all. I am thankful to have an awesome spouse and partner who for some inexplicable reason tolerates me and children who consistently and constantly fascinate and amaze me.


There, not so bad right? I tried hard to be nasty, but the sun is shining, it’s warm, it’s a long weekend and I’m in a good mood. I may even crack a smile.


Happy (Canadian) Thanksgiving, eh?


Prices as at October 6, 2017 (September 29, 2017)

  • The price of oil fell during the week as markets resumed worrying about production while ignoring supply
    • Storage posted a surprise decrease
    • Production was flat
    • The rig count in the US was flat
  • Natural gas fell during the week on a supply build.


  • WTI Crude: $49.25 ($51.67)
  • Nymex Gas: $2.865 ($3.006)
  • US/Canadian Dollar: $0.7934 ($ 0.8025)


  • As at September 29, 2017, US crude oil supplies were at 465.0 million barrels, a decrease of 6.0 million barrels from the previous week and 4.1 million barrels below last year.
    • The number of days oil supply in storage was 30.4 ahead of last year’s 30.3.
    • Production was up for the week by 14,000 barrels a day at 9.561 million barrels per day. Production last year at the same time was 8.467 million barrels per day. The change in production this week came from an increase in Alaska deliveries and flat Lower 48 production.
    • Imports fell from 7.427 million barrels a day to 7.214 compared to 7.710 million barrels per day last year.
    • Exports from the US rose to 1.984 million barrels a day from 1.491 and 0.440 a year ago
    • Canadian exports to the US were 3.559 million barrels a day, up from 3.497
    • Refinery inputs were up during the week at 16.029 million barrels a day
  • As at September 29, 2017, US natural gas in storage was 3.508 billion cubic feet (Bcf), which is equal to the 5-year average and about 4% less than last year’s level, following an implied net injection of 42 Bcf during the report week.
    • Overall U.S. natural gas consumption was down 14% during the week, mainly on electricity demand
    • Production for the week was flat. Imports from Canada were up 1% compared to the week before. Exports to Mexico were up 1%.
    • LNG exports totalled 11.2 Bcf.
  • As of October 6 the Canadian rig count was 209, 139 Alberta, 24 BC, 40 Saskatchewan, 4 Manitoba. Rig count for the same period last year was 160.
  • US Onshore Oil rig count at October 6 was at 748, 2 less than the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States was down 2 at 187.
    • 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 up 3 at 22
    • Offshore rig count at January 1, 2015 was 55
  • US split of Oil vs Gas rigs is 80%/20%, in Canada the split is 56%/44%


  • Some pipeline project got shelved
  • Hearing began in BC on the Federal Appeal of the the TransMountain expansion apporoval
  • Petronas put a schwack of Alberta Deep Basin assets up for sale
  • Trump Watch: This was one of those weeks that underscores the difficulty of being president of the United States. Not perfect, there was that paper towel thing, but I do believe he was trying to do the right thing.
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