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Canadian Rig Activity Jumps, US Refineries Underutilized, Cracks Tighten

Minneapolis, MN | February 16, 2023 | By: Steve Sinos, Blue Lacy Advisors, LLC


Crude Oil


Another major outlet released updated monthly data last week – Baker Hughes (“BH”) published its monthly estimate of worldwide oil rig counts. They count 1,899 rigs globally for January, 65 more than the December estimate and the highest monthly rig count in 33 months of reporting. The gain was driven by Canadian rig growth, which has become an annual tradition between Dec/Jan. This is the eighth consecutive year in which Canada ran more rigs in January than December. BH estimates that Canada ran 226 rigs on average during January, 71 more than the December average, and the most activity of any month of the last three years, except February 2020. Canadian activity picked up during January, despite Canadian grades still trading well behind WTI. As of Friday, Western Canadian Select (“WCS”) traded around $54.50, a discount of ~$20 to WTI. Over the last quarter, WCS has fetched ~75% of WTI, consistently trading $20 or more below benchmark crude. A $20 discount isn’t uncommon, nor extremely wide by historical standards. The WCS basis can be wildly volatile, so recent stability may encourage activity in the context of seasonal patterns in frozen Alberta. Canadian exports to the US picked up as rig activity rose.


*This summary is based off February 5, 2023


A free excerpt, such as this one, will be published on a delay periodically. This is an excerpt from Blue Lacy Advisors, LLC's (“Blue Lacy”) weekly commentary for clients, which is based on a collection of models, research/analytical subscriptions, and bespoke work. Each week Blue Lacy explores how market drivers included in these analyses might affect or be used in clients' planning, budgeting, and execution of strategy. Call Blue Lacy to make an appointment today!


 

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Phone: +1-832-413-3124


Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.


He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.


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