Market Snapshot: Of the almost 1 million barrels per day of cuts to western Canadian oil supply in mid-May, about 700 thousand barrels per day has come back online
Release date: 2020-10-21
In June, the CER reported that oil producers cut western Canadian oil supply by 972 thousand barrels per day (Mb/d) by mid-May 2020. This was because of record low oil prices caused by dropping oil demand from the COVID-19 pandemic, and increased production from OPEC+ countries. Since then, oil prices have increased and producers have brought 700 Mb/d of supply back online. 270 Mb/d of supply remains offline.
Figure 1 shows implied changes to western Canadian oil supply, based on changes to crude-by-rail exports, pipeline exports, refinery production, and weekly oil-storage injections and withdrawals.Footnote 1 By mid-May 2020, producers removed almost 1 million barrels per day (MMb/d) of western Canadian oil supply from markets.Footnote 2
Figure 1. WCSB implied supply cuts, change since end of FebruaryFootnote 3
Source and Description
Source: Genscape (crude-by-rail loadings, pipeline exports, and storage inventories) and CER (refinery runs)
Description: This figure shows changes in crude-by-rail exports, pipeline exports, refinery runs, and storage withdrawals/injections. It illustrates that from March 2020, declining exports, refinery runs, storage injections and implied supply cuts almost declined by 1 MMb/d by mid-May. Since then, increased storage injection and exports have led supply to increase by roughly 700 Mb/d.
By summer 2020, OPEC+ had coordinated production cuts among its members, while other producers around the world, including in the United States, also cut their oil production. Meanwhile, demand for crude oil increased in Canada and globally. In response, Western Canadian Select oil prices increased to roughly US$30/bbl. This is higher than the operating costs of many western Canadian oil producers and they have brought some of their production back online. As shown in Figure 1, refinery production and pipeline exports are above early 2020 levels. Some production remains offline, implying that supply cuts fell to 270 Mb/d by early October.
- Date modified: