Weekend: An Oil Forecast Investors Won't Ignore

Keith Kohl

Written By Keith Kohl

Posted June 4, 2011

Welcome to the Energy and Capital Weekend Edition — our insights from the week in investing and links to our most-read Energy and Capital and sister publication articles.

I’ve heard the naysayers. So far, they haven’t been too convincing…


If you’re among the crowd that’s betting on crude prices plummeting back below $50 per barrel, you might want to reconsider your position.

Remember, it took a massive global recession to knock oil prices off their pedestal.

Even at the lowest point of $33 per barrel, it was simply a matter of time.

We’re long past the days of cheap, plentiful oil.

During the last two years — in the face of $4 gas and $100/bbl oil — U.S. demand is rising, slowly but surely:

us oil consumption 6-3

Of course, there’s one place we can count on for that oil, and my veteran readers know what I’m going to say next…

Expanding Their Crude Potential

For years, we’ve been taking advantage of the growth in Canadian production. Imports from Canada will soon reach over three million barrels per day. In the first three months of 2011, our imports from Canada of crude oil and petroleum products were 723,000 bbls per day higher than during the same period a year ago.

It’s exactly the kind of trend we can’t ignore.

In fact, conventional fields are getting a second surge of activity lately. A few days ago, the government of Alberta announced its oil and natural gas land sale banked the province more than $840 million — a new record for the province.

That might be a bit of an understatement; the new record-setting auction practically doubled the previous record of $474 million set back in December 2005.

And it gets even better. According to the Ron Liepert, Alberta’s Energy Minister, “The most interesting result in this land sale is the focus on conventional oil in the Cardium formation.”

The excitement over the Cardium formation, however, certainly didn’t come as much of a surprise to us. We’ve been dipping our hand into Cardium profits for years.

For the first time in more than a decade, the continuous decline in Canadian conventional production was stalled.

Despite the strong interest in these re-emerging conventional oil plays, there’s only one area that’s destined to rule Canada’s energy profits… the oil sands.

This week, the Canadian Association of Petroleum Producers (CAPP) released their 2011 Crude Oil Forecast. CAPP’s report projects Canada’s oil production will climb to 4.7 million barrels per day within the next 15 years, or roughly 68%.

As you can see, Alberta’s oil sands producers have a tremendous future ahead of them:

canadian crude production

When it comes to production, there’s no better place to lay your bets than on the oil sands — especially when you consider the new in-situ technology being developed.

Current oil sands production made up 60% of Western Canada’s total crude production. And if the United States is still hesitant to pipe crude down from the oil sands, there won’t be a shortage of customers…

The CAPP report expects more Canadian crude to diversify and reach Asian markets as production grows.

We’ll touch on more of these opportunities later next week.

Enjoy your weekend,

keith kohl

Keith Kohl
Editor, Energy and Capital

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