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Raging Alberta Wildfires Depress Canadian Crude Production, Have Little Impact On Prices

Tyler Durden's picture




 

Contrary to conventional wisdom, America does not import the bulk of its crude from the volatile middle east region, but from its sleepy and unremarkable northern neighbor (by a factor of two compared to the second largest source of crude). Which is why the recent eruption of pervasive wildfires in Alberta, which have substantially disrupted production, probably should have far more of an impact on crude risk perception than what happens to 2 million of daily crude output out of Libya, most of which does not even reach the US. From Reuters: "Canadian heavy crude prices have changed little despite wildfires raging in northern Alberta and forcing production cuts, showing there is plenty of supply in storage, market sources said on Wednesday. Western Canada Select heavy blend for June delivery fetched around $17.30 a barrel under benchmark West Texas Intermediate crude, close to levels of a week ago. Dozens of forest fires that have spread in recent days have led to the shutdown of more than 100,000 barrels a day of output in the north-central Alberta region, most of it due to the outage of the 187,000 barrel a day Rainbow pipeline. The southern leg of the line, operated by Plains All American Pipeline LP, was shut due to the blazes. The northern leg has been out of service since a rupture and oil spill in late April." Perhaps the reason why none of this is perceived as a risk is that for about a decade now neither supply nor demand have actually been factors in determining equilibrium prices, which in turn is defined almost exclusively by the amount of free liquidity in the system, and correspondingly, speculator, and margin, scapegoating.

Supply demand irrelevance notwithstanding, there are signs that the blazes may be controlled soon:

Firefighters may begin to gain the upper hand over Alberta’s wildfires as winds ease and humidity rises, lessening the risk to crude production sites, said a spokesman from Alberta Sustainable Resource Development.

Wind speeds have begun to fall from a peak of almost 100 kilometers (62 miles) per hour on May 15 when fires swept through the town of Slave Lake, forcing the evacuation of all 7,000 inhabitants, said Dave Ealey, the spokesman. About 1,000 firefighters have been deployed across the northern half of the province as of May 18.

“What’s really needed is precipitation and cool temperatures,” said Dan Kulak, a meteorologist at Environment Canada, the national weather service, in Edmonton. “The conditions we have right now are pretty good.”

Today’s forecast in Slave Lake calls for a high of 22 degrees Celsius (72 Fahrenheit) and a 30 percent chance of precipitation, according to Weather Underground, a private forecaster based in Ann Arbor, Michigan.

And some more on the closings:

Fires forced Plains All American Pipeline LP (PAA) to stop cleanup work from an earlier oil spill and shut down its Rainbow pipeline system on May 15. Cenovus cut its production at Pelican Lake to 8,000 barrels a day from 22,000, said Reg Curren, a spokesman for the Calgary-based company. Cenovus will stop production at the site when storage tanks are full.

Small producers like Calgary-based Exall Energy Corp. (EE) have also turned off wells. Exall said in a May 16 statement that it shut 921 barrels a day of output because of the fires and mandatory evacuation orders in the town of Slave Lake.

“No crude production is directly threatened by the fires,” said Judith Dwarkin, an economist at Ross Smith Energy Group in Calgary. Some oil produced in the region is being stored onsite because of the Rainbow shutdown, she said.

Oilsands not at risk:

Wildfires have destroyed 186,000 hectares (460,000 acres) this year, said Ealey, the Alberta government spokesman. Fires in the past 72 hours burned the same amount of forest as was destroyed in all of last year.

Syncrude Canada Ltd., the biggest oil-sands miner, is evacuating non-essential personnel from its Aurora project in northeastern Alberta because smoke from the fires is causing air-quality and visibility concerns, said Alison Trollope, a spokeswoman for Canadian Oil Sands Ltd., owner of the largest stake in Syncrude.

“The facilities are not at risk” and production of bitumen from the sandy deposits continues, Trollope said.

Read more here and here.

 

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Thu, 05/19/2011 - 07:38 | 1290698 anynonmous
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Read more here and here.

 

Is George moonlighting as an editor on the ZH main page?

Thu, 05/19/2011 - 07:48 | 1290712 Oh regional Indian
Oh regional Indian's picture

What's really needed is precipitation and cool weather. Captain obvious from the met dept.

Is this regular spring time stuff? or more weather wars? ehhhh? Any canucks?

Curious minds want to know.

ORI

http://aadivaahan.wordpress.com

Thu, 05/19/2011 - 08:46 | 1290838 Terminus C
Terminus C's picture

Well... it has been warm up here for the past couple of weeks but, in all reality we had a really long, cold and highly precipitous (lots of snow) winter.  These fires came out of nowhere and no-one seems to know how they started.  I live not too far from Slave Lake and I know many who live there.  Some of them had less than 10 minutes to get there stuff and get out of town.  The town itself is now 70% destroyed...

There were high winds all last weekend which caused the quick spreading of the fires.

Fires happen all the time up here (we live in a boreal forest) but not usually so early, with no lightning strikes and following a high precipitation winter. 

 

Thu, 05/19/2011 - 09:40 | 1291070 BobPaulson
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Some times certain areas are just due for a fire, espcially if they have not let any fires burn in a while. I don't know if you've been in the backwoods of Kananaskis area, but there is so much dry deadfall you can hardly walk. Up around Lesser Slave was it similar? Lots of reservations around there.

Thu, 05/19/2011 - 09:43 | 1291087 Oh regional Indian
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Thanks for that insight from the ground Terminus. Very interesting, plotting the disaster map globally. Strange times indeed.

ORI

Thu, 05/19/2011 - 10:39 | 1291361 Dan The Man
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its sleepy and unremarkable northern neighbor...

 

Who you callin' a neighbour?

Thu, 05/19/2011 - 07:49 | 1290719 jkruffin
jkruffin's picture

If Canada has oil, then why are we half way around the world fighting arabs for it?  It is so much easier to just take it from the French.  Hello?  LOL

Thu, 05/19/2011 - 08:00 | 1290739 sabra1
sabra1's picture

US made a deal with the arabs, that the US would not open their oil fiels, buy arab oil as long as the US paid with treasuries. yes, the US paid with debt, and according to lindsey williams, the US has every intention of reneging on. once oil hits 200$, the US will then open the US oil fields! once a crook, always a crook!

Thu, 05/19/2011 - 08:49 | 1290836 Flakmeister
Flakmeister's picture

  You realize what you say makes no sense? Do you have any idea how much oil the US has extracted since production began? Try close to 200 billion barrels...

Thu, 05/19/2011 - 09:43 | 1291083 Jreb
Jreb's picture

The french don't have oil. They are in the east. Albertans have oil. Albertans are texans that say "eh" - they shoot back. On the other hand Calgary has more Americans living in it than any other foreign city on earth so maybe the invasion is simply moot.

Thu, 05/19/2011 - 14:54 | 1292723 Diogenes
Diogenes's picture

You don't have to take it. The government gave it to your oil companies for practically nothing, and the Canadian banks loaned them the money to drill it and pump it out.

Thu, 05/19/2011 - 08:05 | 1290742 uwsjack
uwsjack's picture

sleepy and unremarkable? This is the country that burnt down your whitehouse.

(and brought you John Candy)

GFY TD, GFY

 

Thu, 05/19/2011 - 08:56 | 1290870 oddjob
oddjob's picture

dont't forget Marc Emery...now he's a real threat.

http://reason.com/blog/2011/04/27/doj-denies-marc-emerys-transfe

Thu, 05/19/2011 - 11:12 | 1291455 GoinFawr
GoinFawr's picture

And I thought the Canuckian constitution was supposed to prevent extradition on political grounds; I guess theirs means as much to the Canadians as the US constitution means to Americans: in theory it is everything, in practice it's a convenient tool to be used or not used, depending on what suits US plutocrats on any given day.

I'd feel sorry for them, but it's hard to garner sympathy for a populace that is apparently too thick to see that the party they keep voting into power undermines a little more of their sovereignty with every majority gov't they get.

Ah well, one less hippy agitator roaming the streets, I suppose.

Thu, 05/19/2011 - 14:59 | 1292741 Diogenes
Diogenes's picture

Are there any mirrors in your house? Your remarks sound rather quaint coming from an American.

I suppose you have the satisfaction of reflecting that neither Bush nor Obama was legally elected President. So what they have done is  not your fault.

Thu, 05/19/2011 - 08:09 | 1290748 lizzy36
lizzy36's picture

Wild fires are not the norm in the Slave Lake area. This is a freak event.

And current estimates are that as much as 200,000 boe/d are now being affected.

Thu, 05/19/2011 - 08:53 | 1290856 Terminus C
Terminus C's picture

They are not the norm but they are also not unheard of.  Just east of Slave Lake is a vast area that had burnt ten years ago and they were worried about the town being destroyed then.

Thu, 05/19/2011 - 08:12 | 1290750 Cdad
Cdad's picture

heavy crude prices have changed little despite wildfires raging in northern Alberta

 I think this is because today is Headfake Day.  Let the selling continue.

Thu, 05/19/2011 - 08:17 | 1290762 Tinfoil Hat
Tinfoil Hat's picture

I'm sitting at one of those Oilsands right now, lots of smoke around cause the wind shifted last night.  These fires aren't typical for this time of year, as it said more has been demolished in under a week than all last year.  Temps are a bit cooler the last day or two so hopefully we rock some heavy rains soon.  Sucks for Slave Lake though, I used to take patients there (ambulance crew) and can't imagine watching half my town burn to the ground.

 

"sleepy and unremarkable? This is the country that burnt down your whitehouse.

(and brought you John Candy)

GFY TD, GFY"

- Easy friend, look at the world stage over the last few decades and see where Canada fits in, in the grand scheme of things we ARE quite unremarkable and appear sleepy.  Be proud of that and let others have all of their loudmouthed nonsense.  Walk softly, but carry that big stick.  When Canada needs to take care of something we'll take care of it (note: NEED, not meddling)

 

Thu, 05/19/2011 - 08:24 | 1290777 uwsjack
uwsjack's picture

haha... you're right. (and I was kidding brother).

Thu, 05/19/2011 - 08:56 | 1290869 miker
miker's picture

The oil markets are being manipulated just like the stock markets.  By whom????  How about the central banks.  Why?  To keep pushing inflation into the system.  Doesn't it seem strange we had a big spike in prices in 2008, then settled back.  Now again under the ruse of Libyan revolt.  Me thinks Obama protests too much (really too little) about high gas prices.

THEY know the only way to keep this thing afloat is to keep pumping inflation into the system.  Printing money, buying up SP futures and stocks, pushing up commodities.  And it's all coordinated (roughly speaking) so as to not  hopefully overwhelm the sheeples too much. 

Thu, 05/19/2011 - 09:57 | 1291133 Fur Trader
Fur Trader's picture

Mr. Gadhafi,

Hope you haven't been left too 'sleepy' while our ' unremarkable' CF 18-A's have done some remodeling of your country.

 

Regards,

 

Fur Trader.

 

PS that was from a UK Tyler; an American would never have said that.

Thu, 05/19/2011 - 10:49 | 1291408 CrashisOptimistic
CrashisOptimistic's picture

FYI Suncor owns a chunk of Syncrude.  Overall, in the oil sands space, Suncor is the big kahuna.  They just got $1 billion in cash from Total to build another upgrader.

Upgraders are the gizmos that turn oil sands into sellable oil.  They do about 150K bpd each.

As of right now, one of Suncor's two upgraders is down for about 4 weeks for periodic maintenance.  There was going to be a 150K bpd drop from the region anyway.

Thu, 05/19/2011 - 19:03 | 1293770 wstrub
wstrub's picture

The fact that oil is bought in US dollars is the issue......makes no difference who buys.

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