The banking group says the power outage at Syncrude Canada’s oil sands facility near Fort McMurray, Alberta this past week will put production offline at least through July. The facility is capable of producing up to 360,000 barrels per day, upgrading thick bitumen to light oil.
Goldman Sachs already figures this situation could lead to a shortage in North America’s supplies – shrinking stockpiles at the main storage hub in Cushing, Oklahoma. The biggest outcome will be that the outage will support U.S. oil prices, according to a note on Sunday, as carried by Bloomberg.
But with OPEC’s rather ambiguous agreement to boost oil production last week, will also weigh on the price of Europe’s Brent crude as well as the U.S. benchmark WTI Crude. As of 07:51 a.m. EDT on Monday, the U.S. benchmark WTI Crude was up 0.25 percent at $68.75, while Brent Crude was down 1.57 percent at $74.14, according to Oil Price.
The Syncrude shutdown will have an effect
“With the global market pricing to pull crude out of the U.S., this loss of U.S. supplies will exacerbate the current global deficit, making the increase in OPEC production all the more required,” Goldman Sachs said.
The banking group also points out that with OPEC increasing production, “exports will not be delivered until August with June stock draws already accelerating.”
And as the Financial Times notes today, stockpiling at the Cushing hub has already been slumping for the last five weeks.
Syncrude is a joint venture majority owned by Suncor Energy Inc, with minority stakes held by Imperial Oil Ltd. Phil Skolnick, an analyst at Eight Capital, said with that with the Syncrude facility being offline through July, this will allow some space to open up on Canada’s limited oil pipeline capacity. This should reduce the discount that Canada’s heavy crude trades at compared to U.S. light oil futures, Skolnick said, according to Reuters Canada.
