Hi to all,
Here’s what I have for this week’s price changes:
*Heating and stove oil to increase by 6/10ths of a cent/litre
*Diesel to increase by 7/10ths of a cent/Litre, and...
*Gasoline to drop by 1.2 cents a litre.
Market highlights
Oil rises
Oil prices faltered, sputtered and then recovered losses over this past week as a second feared wave of Covid-19 was seen to start as cases in Florida and Arizona appeared to rapidly increase two weeks after the start of the US Memorial Day weekend.
Oil then began a rise later in this session as China was seen to be building strategic reserves over the last five months as they were successful in acquiring cheap oil to the tune of 440 million barrels, helping to support prices.
China is not only hoping to put some oil away in reserve, but they are hoping with the rise in prices to release some from the reserve and take advantage of selling at a higher price.
With cautious optimism however, as previous numbers were believed to be a signal of increasing industrial recovery.
Strategic oil reserve? In Canada?
Years ago, there was heavy talk of the United States expanding its strategic reserve of oil, that is oil in storage, to help protect the supply of oil in the event of any kind of national emergency.
The plan was to use Bell Island’s old mines for such a purpose quickly fell through as the United States wouldn’t have any part of its reserve outside the country.
But why doesn’t Canada have one-but for a different purpose?
While not a new idea, the problems of having a world storage issue along with an over-production problem, has led to the collapse in the price of oil. However, if Canada set up a reserve, it could buy oil at the low price, then release it again as oil prices recovered, thus helping oil companies weather any downturn in price, or at least, help avoid one.
While the reserve, or the storage, would help offset falling prices, it has a strong ability to support oil, and thus , preserve the state of any royalties the provinces would see from their resources. As far as I know, besides the “on land” tank farm, we don’t have that capability like the US or china, the US with close to 800 million in their reserve and China with a capacity of 684 million barrels.
US rig counts stabilizing?
While US domestic production has been dropping since the start of the pandemic, from 13.4 million barrels to 11.2 million, rig counts have also dropped from 984 rigs to Friday’s 279 rigs, a drop of just 6 rigs.
The week previous saw a drop of 17 rigs down to 284.
Worth watching, and with oil prices showing some small signs of recovery, is the US shale industry getting set for a possible turnaround as prices rise?
That’s it for this week!
Regards,
George Murphy
Twitter @GeorgeMurphyOil
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