Here is the latest on Canadian Crude Oil production from Stats Canada figures released this Wednesday morning, December 9th.
Canada produced 17.2 million cubic metres of crude oil and equivalent products in September, down 3.5% compared with the same month in 2014. (So a decline in September)
Total exports of crude oil and equivalent for September were up 12.0% from the same month a year earlier to 15.3 million cubic metres. At the same time, imports of crude oil and equivalent were relatively flat, edging down 0.4% to 2.5 million cubic metres. (So Canada has added to the world supply glut)
For the quarter ending September 30, production of crude oil and equivalent products increased 4.8% from the same quarter a year earlier to 57.1 million cubic metres. At the same time, exports of crude oil and equivalent products increased 7.9% to 45.4 million cubic metres, while imports were up 4.2% to 8.4 million cubic metres. (So, on the quarter Canada has increased production and net exports).
This increased Canadian production while bemoaning a supply glut brings to mind the old saying from Pogo “We have met the enemy and he is us”. This is classic behavior for commodity producers during a supply glut. Each one wishes the others would curtail but each one tends to produce like mad even at the lower prices in an attempt to grab cash flow.
What I find strange about the current situation is that the Saudies (alone or with OPEC) are thought to have had the ability to single-handedly maintain the high price but they chose to let it crash. Possibly they had in fact lost the ability to control the price but they may think they can regain control after they show OPEC and others the pain that comes from a free market price in this commodity.
Sadly, if Canada can’t compete on a free market basis then there is not much to be done. Should we really be hoping for a restoration of the OPEC price-fixing cartel? In the absence of either shortages or cartels, commodities are a game where low cost producers win, not high-cost producers. For Canadian oil producers cutting costs may be the only option available.