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Crude Prices Jump On Oil Sands Outages

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Syncrude has cut its bitumen production for this month due to a mechanical disruption, Bloomberg has reported, citing an unnamed person familiar with the matter.

This will likely contribute to a price rally in oil sparked by demand worries and tight supply as much of U.S. Gulf of Mexico production remains offline in the wake of Hurricane Ida, which at one point shut down more than 95 percent of Gulf oil output.

Syncrude, majority owned by Suncor, produces some 275,000 bpd of crude oil from bitumen at its upgrader in Alberta, according to the latest data, which was for January to May.

The Financial Times reported last month that Canadian crude oil output had reached 3.5 million bpd in the first half of 2021 as the industry recovered from the worst effects of the pandemic during its first year. This was a record high, which is a little ironic given the trouble that the Canadian oil sands industry has been having with regulators, the government, and its biggest export buyer in the past few years.

Pipeline protests and climate pledges have interfered dramatically with the industry’s growth prospects, but producers have stuck to their guns and kept mining bitumen and turning it into synthetic crude. Despite the interference, Canada remains the largest foreign oil supplier to the United States.

Prices for Canadian crude have reflected the situation. Since last year, these have rallied significantly, closing a huge gap with West Texas Intermediate that opened up due to the persistent pipeline shortage. If the Syncrude force majeure continues, prices for Canadian oil will likely rise higher still. The company has yet to make an official statement about the outage.

Meanwhile, Prime Minister Justin Trudeau won yet another election and immediately pledged to cut emissions from the oil and gas industry. At the same time, production is set to continue growing, according to the Canadian Association of Petroleum Producers, in what sets the scene for an interesting interaction between the next government and the industry.

By Irina Slav for Oilprice.com

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