RE:Suncor getting record prices on crack spreadsYes, it is awesome!
SU as a vertically integrated producer, selling refined product, and with that, largely avoids the $30 WCS/WTI diff crack spreads that are a current drag on the other CDN heavy oil exporters.
I know you have been following this for a while, so this info may be basic and redundant, and is meant for others.
A good explanation of crack spreads can be found here:
https://www.cmegroup.com/education/articles-and-reports/introduction-to-crack-spreads.html The most common is the 3:2:1 crack spread, meaning roughly, when you refine 3 bbls of crude, you get 2 bbls of gasoline, and 1 bbl of distillates.
Distillates are ULSD (deisel), HO, (heating oil) and Kerosene (jet), which enjoy the $70 - $80 spread.
The other 2/3 of the refining run is RBOB ( gasoline), now fetching around a $25 crack spread:
https://www.tradingview.com/symbols/NYMEX-ARE1%21/ The profitable crack spreads and the low product inventory situation and shortfall, has the potential to be a catalyst to propel the integrated producers to new highs.
The US NE coast diesel, heating oil, and jet inventories are at critical levels, and have not had the seasonal builds needed to get them through the winter.
Europe will need and is depending on far more gas and diesel supplies this winter from the US, without the normal Russian supply.
Some US refiners are worried that the critically low product inventory may even force the idiots in the Biden admin to halt US finished product exports before November midterms in an act of desperation, causing some refineries now to prepare to cut runs as they have nowhere to store product otherwise, making the situation worse. They need to take the product export ban option off the table so refiners can move forward with refining plans and produce product.
Low Mississippi water levels are restricting finished product movement from PADD2, which uses our Canadian oil as a feedstock, and is causing our diffs to widen.
The US has lost 5% of it's refining capacity in the last 2 years as poor US energy policy and Covid cutbacks forced them out of business.
Meanwhile the 100 year old US Jones Act prevents movement of product between the USGC and the Eastern US on non US Jones Act ships, of which there are too few, and are too expensive.
The Colonial pipeline from the USGC to the east is maxxed out and can't solve the problem.
Many US midwest and California refiners have had turnarounds, restrictions, fires, and unscheduled downtime maintenance, taking them offline. Higher prices in these areas are expected as in Vancouver lower mainland, which has in effect isolated itself by shunning Alberta supply all these years, and instead choosing to be part of the US west coast energy complex. Now they can enjoy their high west coast prices.
China recognizes the opportunity and has unusually taken the step to expand crude quotas to allow smaller independent refineries to cash in on the bonanza.
All this serves to jack up and hold product prices regionally at high levels, and globally.
The first signs of this self inflicted energy crisis is now materializing, and becoming more and more serious. We have had a huge shortfall in capital investment for years for reasons we know too well. It will affect all aspects of our use of oil. We now have problems with a lack of production, refining, and distribution. Demand globally is continuing to prove strong as we still have a long way to go before we can complete an energy transition. The recession will take some of the pain away by reducing demand somewhat, our only savior. What we need is more supply and investment to promote supply instead of government policies that promote demand with handouts and energy subsidies to cushion the blow to consumers. No effort has been made to promote conditions that increase supply, because they clearly want the industry to be dead in 5 years. No long term larger oil projects will be built under these conditions, so those with operating infrastructure already in place and the reserves will be invaluable in the long term.
Although we make fuels and product in Canada, Canada's retail fuel pricing is dependent on and follows the US wholesale prices. With product and delivery issues getting worse in the US this fall and winter, diesel will increase in price as inventories drop more, and act to prop up gasoline prices. The near term outlook for higher crack spreads is excellent, as high fuel costs bring more profits for those that can produce and refine it.
With this incredible opportunity and outlook right in front of us, I cannot bear NOT to own the beaten down undervalued Canadian integrated oils, SU, CVE, and even CNQ as the SHTF over the next while. In the meantime, these gems are experiencing general market selling and liquidation pressure.