Americas News
Brent, WTI Make Gains but Canadian Oil Selling at Huge Discounts
The sheer momentum of worry over a potential shortfall in global crude supply due to the U.S. sanctions against Iran once again caused traders to push oil prices upward on Thursday: Brent rose 21 cents to $81.55 per barrel, and West Texas Intermediate settled up 55 cents to $72.12.
The on going worry is despite analysts being able to determine how much Iranian crude will be removed from the market once the sanctions come into full effect on November 4, and despite the repeated assurance of major producers within the Organization of the Petroleum Exporting Countries (OPEC) that they have the ability to make up for any shortfalls.
However, at least one analyst on Thursday refused to join the chorus of experts who think that the Iranian situation combined with other geopolitical tensions will jack up p-rices into the triple digits: Ole Hansen, senior manager of Saxo Bank, said, "On paper, you could argue that the technical and fundamental perspective points to higher prices, so I think that will carry on into next week and further out."
"But he added, "$100 dollars barrel, I am struggling to see that: already at $80, we are seeing emerging-market local oil prices pretty close to where we peaked a few years ago ... the race to protect consumers from further price rises from here could potentially impact demand growth sooner than would otherwise have been expected."
Mitsubishi UFJ Financial Group offered a slightly different view: in a note to clients it stated, "We view that crude market risks are heavily skewed to the upside and whilst we are not explicitly forecasting Brent to rise to $100 per barrel, we see material risks of this coming to fruition."
Meanwhile, in this market of relatively high crude prices, it seems that the one western country that is reaping any financial benefits continues to be Canada: HuffPost on Thursday reported that Canadian oil exports are selling at their steepest discount in years due to the country's inability to build pipelines to new non-U.S. markets.
In fact, benchmark Western Canadian Select traded at just above $30 per barrel on Thursday, a 58 percent discount compared to West Texas Intermediate, which makes Canadian oil the cheapest in the world, according to OilPrice.com.
Krishen Rangasamy, an economist at National Bank Financial, said ,"We are using everything we can to ship our oil, whether rail or pipelines, and we're still left with rising inventory, causing prices to be weak."
While many arguments have been made about the benefits of the current high crude prices (one being that it may spur badly needed infrastructure investment), some analysts lament that they are not based on fundamentals: Tim Fox, chief economist at Emirates NBD, earlier this week noted, "Sentiment can continue to keep oil elevated I think in the short term."
