Canada Likely to Buy Full Trans Mountain Pipeline Project
In recent months, there has been conflict between British Columbia and Alberta over the expansion project for the Trans Mountain pipeline. The pipeline runs from Edmonton, AB through British Columbia to the west coast. Alberta proposed to expand the capacity of the pipeline by 3 times the pipeline now, allowing a total capacity of 890,000 barrels of oil. The Canadian government approved the project, but then was later rejected by British Columbia for environmental reasons. In retaliation, Alberta proposed a bill to limit crude output to other providences and U.S. states targeting British Columbia who relies heavily on crude from Alberta. This also pushed prices up in Washington State.
It was announced last week that Canada is planning to buy the Trans Mountain pipeline to ensure the expansion is built. The expansion will allow Canada to export more crude oil to Asian countries and western U.S. states. After the project is complete, the Canadian government will plan to sell the pipeline.
OPEC and Shale Squeeze Out Volatility in the Oil Market
There are two main drivers of lower volatility in the oil market, OPEC production and the U.S. shale boom. There will always be volatility due to geopolitical risks, and more recently lowering inventories. However, WSJ reported that the volatility of Brent crude has fallen from 32% to 22%. This is measured by the standard deviation of daily price moves over the past year. As inventories drop, crude oil prices rise. The U.S shale producers respond quickly to the rising prices to capitalize on the margin and output more crude oil in the market. The EIA reported that the U.S. oil output jumped to a record of 10.47mmbd in March. OPEC also announced they will ease their production cuts to reverse the dropping inventories to help stabilize the market. On the other hand, OPEC and other supporting countries also protects inventories from rising too high and prices dropping significantly by regulating production and supply. Since 2016, OPEC has been cutting oil production to reverse the over supplied market and push prices up.
In Other News
Canada is likely to buy Kinder Morgan Canada Ltd.’s Trans Mountain oil pipeline and its controversial expansion project in a bid to ensure it gets built amid fierce opposition, according to a person familiar with the talks.
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As Volvo, Daimler, Navistar, Tesla and other companies push development of electric trucks, an industry alliance wants to establish a global charging standard. That goal faces skepticism from trade groups such the American Trucking Associations and the North American Council for Freight Efficiency, or NACFE. Both worry that with electric trucks barely in their infancy, there’s not enough data to point the way to the most effective charging system.
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Brazilian oil workers began a 72-hour strike on Wednesday in a new blow to President Michel Temer following a nationwide trucker protest that has strangled Latin America’s largest economy for over a week.
Global petroleum inventories declined through 2017 and Q1 2018, marking the end of a period of oversupply. OPEC plans to reconvene on June 22, with markets appearing in balance, but uncertainty will remain until OPEC is committed to a new course of action.
A strike that temporarily shut down Canadian Pacific Railway Ltd. operations is over, as the company and the union representing conductors and locomotive engineers on Wednesday reached a tentative four-year deal.
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U.S. crude oil production jumped 215,000 barrels per day (bpd) to 10.47 million bpd in March, the highest on record, the Energy Information Administration (EIA) said in a monthly report on Thursday.
Uber is in discussions with Alphabet’s Waymo to add the latter’s self-driving cars to its platform, Chief Executive Dara Khosrowshahi said Wednesday.
New York, New Jersey, and California combined on Thursday to authorize about $1.3 billion in spending aimed at speeding the rollout of necessary charging stations, marking significant investment into electric vehicle infrastructure.
Volatility in the oil market is being squeezed out by two giant forces: U.S. shale and OPEC. Even threats of war, sanctions and an economic crisis can’t rouse the sort of market movements that drive profits for traders and hedge funds.