RE:RE:Any thoughts on how the change in ENB policy will affect CJ?
A few weeks ago, ENB announces that with the new "use it or lose it" procedure, they will have spare capacity on their mainline and will delete the "air" barrels.. As oil trades at the margin, i.e. lowest bid price is THE price, the oilcos with shut-in capacity began to bid for the spare capacity. Any price in excess of opex increases cash flow for the producer. So, the producers begin a dutch auction of lower and lower WCS prices so they can improve their bottom line. The result: even though more barrels will flow on the mainline, the bidding war for the marginal barrel drove prices down with an increased differential. Keep in mind that 'paper' barrels far excdeed physical barrels by up to a 10x ratio at times.
This new and lower WCS price alarms the producers already shipping on the mainline and demand that ENB does not institute their new procedure. Counter-intuitive to say the least.
However, the markets have not bid heavy oilco prices higher to account for this in spite of much greater netbacks to oilcos like CJ. This is just another example of why Cdn oilcos remain out of favor - future risk is unknown in a country controlled by greens and not logic. I still hold a large position in CJ. I believe that eventually NA markets will revert to the norm.