By Michael Bellusci
Given the loss in demand from refineries, “we expect that commercial inventory levels could be breached within 2-3 weeks if Canadian production is not reduced further,” Chieng wrote.
“Given this, it is not the challenging economics of oil sands assets in the current price environment that drives the decision to shut in production, but rather, the physical limitations of storage capacity in a demand challenged environment that will ultimately drive producers to organically curtail output,” she said.
Goldman estimates that Canadian producers have announced production cuts of about 100,000 barrels per day. Suncor Energy Inc. said last week it will shut in one of its two so-called trains at its two-year-old, 194,000 barrel-a-day Fort Hills oil sands mine. The company also is delaying the start up of its MacKay River oil sands wells to May.
The bank sees Suncor as Canada’s best positioned energy company to navigate the current environment, given its integrated business and “more resilient” balance sheet. Suncor shares have fallen 48% this year.