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Record low Canadian oil prices risk deteriorating significantly cash flows and key credit metrics at Canada’s oil and gas producers, rating agency DBRS said on Wednesday in the latest warning that the ultra-cheap Western Canadian crude is taking its toll on Alberta’s oil industry and economy. Severe takeaway capacity constraints have resulted in Western Canadian Select (WCS) —the benchmark price of oil from Canada’s oil sands—plunging to as low as $14 a barrel earlier this month, with its discount to the U.S. benchmark WTI at around $50 a barrel. In the face of further delays in new pipeline approvals, most notably the blow to the Trans Mountain expansion project in late August, the Alberta province and its oil producers are looking for alternative medium-term solutions such as increased crude by rail shipments or, possibly, an industry-wide production cut to ease bottlenecks and drive heavy oil prices up. If WTI drops into the low $40s—which could be the result of OPEC and allies failing to rebalance the market and/or if global demand outlook further weakens—“DBRS may be compelled to take negative rating actions” on Canadian oil and gas companies exposed to Western Canada, the rating agency said in its report. […]
