Oil industries in Canada and Russia
The oil industry in Russia, as well as Canada, provide a significant amount of income for the local economies. It means that any market volatility can significantly affect not only the oil companies but the county in general. It is worth mentioning that both Russia and Canada are one of the biggest oil producers in the world.
For example, Russia is the third-largest oil exporter whereas Canada is also amongst the top producing countries. At the moment, oil prices are not as promising as it used to be several years ago. Moreover, the oil industry has to deal with various problems as a quest for greener energy sources and more complicated regulations. In this situation, internal problems create additional pressure on the local oil industry.
The price of Brent crude oil decreased on Friday. Right now, the price of Brent crude futures fell by 4 cents to $59.88 a barrel. Meanwhile, the price of West Texas Intermediate (WTI) crude futures reduced by 5 cents to $55.30.
From the beginning of the week, Brent Crude futures increased by 2.1% The WTI crude futures rose by 0.8%.
Canadian oil industry
One of the provinces of Canada decided to reduce oil production until the end of 2020. Alberta’s provincial government made this decision several days ago. It is not the first oil reduction as the previous provincial government led by Premier Rachel Notley made this decision several months ago. Moreover, the current government decided to extend this decision until 2021.
There are many problems which have a negative impact on the Canadian oil industry. For example, let’s have a look at the pipeline called Line 3. The construction of the pipeline will take longer than expected due to delays.
According to the initial plan, the pipeline should be completed by the end of 2019. However, this pipeline won’t be ready until late 2020.
Another problem for the Canadian oil industry is the upcoming IMO guidelines. Starting from 2020 International Maritime Organization will lower the sulfur content in marine fuel from the current 3.5% limit to 0.5%. This decision will affect Canadian oil companies. It is bad news for Canadian heavy oil. Thus it means that the demand for marine fuel which will exceed the new limit will decline in 2020.
It doesn’t mean that there is no positive news for the local industry. Thanks to the decision to reduce the oil production the price of Western Canada Select (WCS) increased.
Russia’s budget and oil prices
As mentioned above the Russian Federation is one biggest oil exporters in the world. Money which goes to the state budget is quite significant for the local and state budgets. It means that the Russian economy is vulnerable to any market volatility.
One of the best ways to minimize the damage caused by oil prices is to have a conservative policy. For example. Based on Russia’s state budget for 2019 less than $60 per barrel is fine. Moreover, for Russian authorities, the price of $49.20 a barrel is enough to comply with policies. Right now, the price of Urals oil is $56.80.
Oil prices fell on Friday. Oil industries in Russia and Canada are trying to adjust to the new reality.
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