Gear Energy Ltd T.GXE

RE:RE:RE:RE:RE:For those who care...

[zack50]

MRG_WPG wrote: I guess I find the WCS/WCI thing confusing... Do stocks like TVE and WCP move based on WCS or WTI ?  

Thanks

The WTI light sweet crude oil futures price is a primary benchmark oil price, while WCS is a lower quality sulfur-containing crude oil. The price indicator between the two products is the indicator for whether or not the US refinery chooses to increase crude imports from Canada.

The WCS price usually follows the WTI trend but as a rule the oil price discount exists and remains lower due to quality differences (sulfur content) and limited pipeline capacity to ship WCS to the US market which accounts for ~95% of Canada's crude oil exports. There is of course a lack of access to international markets other than the US and therin lies the problem. Without access to other markets, Canada really has no choice but to sell most of its oil at whatever price buyers in the US are willing to pay.

As of Jan 5/23, the price differential between WTI and WCS was US$21.67. The spread between WTI and WCS narrows if/when imports increase and usually changes on a daily basis. Btw, if you were to take the Jan 5/23 differential price and use it as a yearly average, the simple math tells us that Canada is losing billions of $$$ annually.

TVE, WCP and other Canadian producers are all affected by the differential... the lower it goes, the greater the effect on Canadian producers economic viability of their operations.

You may well remember a couple of years ago when oil was selling for less than a cup of coffee... that could hardly be considered to be economically feasible, under any circumstances. Now, I don't envision that happening again any time soon, if ever, and because of diminishing supply and forecasted increase demand I think it's safe to assume that oil companies are going to be raking in barrels of cash for years to come... but who knows!

Hopefully that sheds a little light on the subject.