WTI Extends Losses Below $72 After Big Crude, Cushing Build

WTI sunk below $72 ahead of the DOE data, heading for the biggest 2-day drop since July, and held those losses on the crude build...

“The oil market can not shield itself from the rout in equity markets,” said Norbert Ruecker, head of macro and commodity research at Julius Baer Group Ltd. in Zurich.

Meanwhile, WCS settled at $26.17/bbl, lowest at close since August 2016, pushing Western Canada Select’s discount to West Texas Intermediate crude to $52 a barrel on Tuesday, the widest on record...

The plunge in Canadian crude prices may dent exploration budgets and shrink the nation’s rig fleet, according to the chief executive officer of a major drilling contractor. The discount on Canadian crude will hammer cash flow, Precision Drilling Corp. CEO Kevin Neveu said at an event in Calgary.

With Canada’s debt and equity markets “almost closed” to energy producers, cash is the sole source of funding for drilling, he said.

“If cash flows get crimped back on a quarterly basis or a daily basis by the widening differential, they would adjust their rig counts sometimes even weekly,” Neveu said.

However, there is a silver lining as The National Post reports, Chinese oil buyers are making a beeline for a bargain across the Pacific.

With Canadian oil over 60 per cent cheaper than U.S. benchmark West Texas Intermediate and global marker Brent, China's refiners are being lured to the heavy and sludgy crude. That's because, apart from being a source of fuel, it's also rich in bitumen - a black residue used to build everything from roads to runways and roofs.

"The policy of boosting infrastructure investment has been bullish for bitumen," said Li Haining, an analyst with industry consultant SCI99 in China's Shandong province. "The supply of the Merey grade has been disrupted since May, pushing refiners to look elsewhere. As late-September and October is traditionally the peak season for construction projects in China, demand will be further supported."

Apart from Canada, China has also turned to producers such as Brazil for alternatives, said WengInn Chin, a senior oil market analyst at industry consultant FGE in Singapore. Demand for heavy crude is particularly high among the Asian nation's independent refiners, known as teapots.

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