Changing market dynamics highlight risks of relying on single customer, bank says
October 29, 2012
West Coast access is “critical” if Canada’s oil sector wants to grow beyond 2015, Bank of Nova Scotia said today in a commodity market flash.
“Guaranteeing world prices for Western Canada’s oil, as well as volume growth after 2015, requires much greater market access to Asia,” Partricia Mohr, Scotiabank’s commodity markets specialist, said in an update.
She notes that tightening fuel economy standards in the United States and cheaper natural gas will likely keep a lid on U.S. oil consumption. Canadian producers, meanwhile, have been whacked by pipeline bottlenecks and a glut of U.S. production. The uptick has been so sharp that, for the first time since 1949, the U.S. emerged last year as a major net exporter of petroleum products, Mohr said.
Several companies including Shell, BP plc and Vitol Group, the world’s largest oil trading house, are now eyeing Canada’s East Coast refineries as a possible destination for exports of raw crude, thanks mainly to the flood of fresh supplies extracted from tight oil pools.
“In contrast, the [demand] growth markets for petroleum are in China, India, the rest of emerging Asia, parts of Latin America, the Middle East and Russia,” Mohr said.