Analysis shows that Canadian oil production appears to be the most affected by the Covid-19 pandemic and from the decline in oil demand, with the close expected to rise above 1.1 million b / d between April and June.
Canada’s closed oil output has been at least 325,000 b / d, according to Rystad Energy’s review, followed by Iraq (300,000 b / d), Venezuela (235,000 b / d) and Brazil (200,000 b / d).
The United States is likely to close “hundreds of thousands” of oil barrels but the amount is not yet official and is not included in the Rystad estimate, which was released on Thursday.
“Due to the severe damage to demand in North America in April and May, we estimate that oiland closed and heavy oil restrictions in Western Canada could exceed 1.1 million b / d in the second quarter of 2020, with the added risk of short-term decline,” said Rystad senior analyst Thomas Liles “Our forecast for the rest of the year has increased to 513,000 b / d for the third quarter and 293,000 b / d for the fourth quarter.”
Last month Rystad analysts predicted that Western Canadian crude oil storage would likely be close to maximum capacity by the end of April at current production levels.
“The movement in the benchmark Canadian oil price since April 1 seems to be reinforcing increased pressure on storage capacity in the basin, with Canadian benchmark prices being lighter decoupling” from West Texas Intermediate in recent days.
Based in Calgary Athabasca Oil Corp earlier this month was called the first halt to all Canadian bitumen production sites in response to depressed prices and economic contraction caused by coronavirus. The company carries out a Hangingstone operation, closing at around 9,500 b / d which was tapped by steam injection from a natural gas-fired boiler into an oil deposit and northeastern Alberta mine near Fort McMurray.
Midstream operators have also “underlined the tension in storage capacity and production reductions that have occurred,” noted analysts at Rystad. “The latest communication from upstream players also highlights the storage puzzle and ensures a reduction in the near future.”
“Additional oil and weaknesses” are scenarios where mining projects that have not been upgraded, as well as higher-cost thermal projects, will be taken completely offline.
Rystad’s short-term projections for large thermal projects are not as sharp as mining because of the need to maintain the integrity of the thermal reservoir and “technical ease” that allows mining projects to adjust short-term results. Current company estimates indicate that most short-term restrictions will come from mining projects.
“However, the chronic lack of storage capacity in Western Canada is guaranteed to emerge as a major constraint on upstream volume in a low demand environment,” Liles said. “As with the recent decoupling in light benchmark prices, the experience for Canadian producers will probably remain separated” even if there is a positive thing from a meeting held Thursday (April 9) by the Organization of Petroleum Exporting Countries and its allies “or who other “potentially positive news surrounding the development of global short-term supply. “