Mid-Week Review

Saudi Aramco says electric vehicles won’t heavily impact oil demand

The world’s largest energy company says the electrification of vehicles isn’t anywhere near ready to overtake the traditional engine in the transport sector. The transport industry accounts for more than half of oil demand and last year Morgan Stanley forecast that by 2025 there could be 36 million electric vehicles on the road globally. The switch from gasoline and diesel cars to electric powertrains has led some to suggest that global oil consumption could fall.

Canada’s Oil Patch Divided as Alberta Eases Cuts

Alberta government’s decision to respond to the very low Canadian heavy oil prices with mandatory production cuts of 325,000 bpd has created a division among Canada’s oil industry. The government of Alberta has achieved its primary goal with the cuts—to lift the price of Western Canadian Select (WCS) and to help narrow the huge differential between WCS and WTI from late 2018. In recent weeks, the discount of WCS to WTI has been below US$15 a barrel, compared to more than a US$40 differential in the fall of 2018. The production cut in a free market like Canada, however, has drawn uneasy comparisons with the way OPEC intervenes on the global oil market to curtail production at times of glut or to ramp up oil supply when shortages are created or expected.

Russian oil imports surge in US as Venezuela’s slow to a trickle

Only two ships carrying 766,000 barrels of crude oil from Venezuela arrived in the United States last week in the wake of debilitating oil sanctions lodged against the state-run oil company, PDVSA, according to investment bank Caracas Capital Markets, which tracks Venezuelan oil shipments. Russian companies, meanwhile, sent nine ships carrying more 3 million barrels of crude oil and petroleum products, according to a review of the U.S. Bill of Ladings database by Caracas Capital. That import data is clear evidence that Russia is profiting off the geopolitical battle, selling into the U.S. market while helping to prop up the Caracas leadership that Washington is aiming to replace, said Russ Dallen, a managing partner at the investment bank who advises U.S. officials on Venezuelan matters.

Big Oil taps into electric era

Automakers are trumpeting their long-term intentions to forsake gasoline engines for electric motors. Big Oil hears the message and is taking halting steps to adjust its business model to survive in an era when gasoline sales could start drying up. Full-electric and plug-in hybrid vehicles are projected to account for more than half of global light-vehicle sales, or more than 60 million vehicles, by 2040, according to Bloomberg New Energy Finance. That poses an existential threat to today’s vehicle fuel providers. As a hedge, the oil industry is making early and relatively inexpensive investments in electrified-vehicle charging infrastructure and technology to get ahead of potential disruption.