Cenovus Energy Inc T.CVE

RE:RE:How low can WTI go?

[Just1Question]

saintpeeter wrote: The Canadian companies are starting to consider cutting production, in order to deal with the low WCS prices.

The primary problem for Cenovus is the WCS differential to WTI which is caused by the lack of infrastructure to move product out of Alberta.  Cenovus would be incredibily happy to receive WTI prices even at their current mid 50's a barrel. 

However, that is a seperate issue from WTI which is seeing market headwinds in terms of anticipated future supply demand dynamics.  This might be resolved by Opec plus Russia adjusting supply, but that is yet to be seen.

Certainly Cenovus has tried to reduce the impact of differentials on their sales by buying train capacity, and also through contracted firm capacity on pipelines.  They have also started storing some of their oil underground hoping to sell at better prices in the future. Unfortunately that wont work for long if the other Canadian players keep over producing.  Cenovus can't do it alone.


Once the new Sturgeon diesel refinary switches over to dilbit, (now anticipated late December), that should also absorb some of the excess oil production.  And of course oil trains are ramping up in terms of capacity as well. 

Any reduction in production in Alberta, and or increase in take away capacity will help get the discount to normal.  A "Normal Differential" is roughly defined as the cost of shipping product to the US market.

Cheers