Crude Observations

Not Naughty? Nice!

So anything interesting happen this week? Any leaders of political parties facing headwinds? Any movement in commodity prices of note? It’s weird, isn’t it how so much news rushes up to swamp us in the run-up to the Christmas holidays and the new year? It’s like people want to get a whole mess of news out of the way so they can start the new year with a fresh slate. Who knows, maybe they are trying to clear the board in time before Christmas so that the big guy can move them from one list to the next.


It’s like tax loss selling – everyone has a total dog in their portfolio (I’m looking at you Pengrowth) that they are embarrassed to admit they have, unless of course they shot the lights out with something else, then they hold up their genius investment as a secret plan to lessen their capital gains tax.


At any rate, I digress – what was my point? Well with certain seismic political moves happening we have some pretty prominent names moving to different parts of the naughty list and some moving off the list altogether. The two biggies of course are Donald Trump, who is most assuredly on the Democrats naughty list after being subject to two articles of impeachment. Also on the naughty list – Boris Johnson and Jeremy Corbyn after their epic UK election debacle – Boris in on the list for being, well, a buffoon and Corbyn for being despicable. Here in Canada we have a number of conservative politicians finding themselves on the naughty list, with Jason Kenney posting near record disapproval numbers and Andrew Scheer resigning as leader of the Conservative Party of Canada under a cloud.


All this of course has me thinking I need to revive an annual tradition which of course is the pre-Christmas publication of the naughty list, which I have once again purloined from the dude in red.



Word of warning though – it isn’t going to be pretty.


Donald Trump – Naughty


Donald Trump is almost a permanent entry on the naughty list. This is the 25th year in a row on the naughty list for young Donald. It was expected that being President might soften the Don and that spending a year under the thumb of Nancy Pelosi would bring to him a more conciliatory perspective. Nope. Rather than make nice, Donald doubled down, perfectly shaking down the newly elected Prime Minister of Ukraine in order to gather dirt on a political rival (Joe Biden) and doing it so clumsily that he got himself impeached. While it is unlikely he will be tossed out of office by the Senate where he enjoys rabid partisan support (for now), this isn’t going to look good on his presidential transcript which as we all know includes massive deficits, tax cuts for rich cronies, a trail of criminality, immigrant children separated from their parents and no wall that no one has paid for. Present for Donald Trump this year is going to include not being impeached and instead having to suffer through a brutal and angry election campaign, quite possibly a recession, no deal with China, conflict in the Middle East and a severe case of iPhone hand – take that Donnie!



Rudy Giuliani – Naughty


I usually avoid looking up the fate of low level stooges like this, but I couldn’t help it this year given his prominence as the grifter in chief of the whole Ukraine affair. His unhinged lunacy overshadowed only by his colossal incompetence, Rudy’s place on this list is well-earned. As someone who watched him rally a country after 9/11 and who believed his rep as a hard-charging take no prisoners prosecutor, this fall from grace is particularly jarring. Graft, corruption, payments… Rudy’s gift is a talk radio hosting gig at a local NPR station in Vermont.



Boris Corbyn and Jeremy Johnson – Naughty


This dynamic duo from the UK come by their list position honestly. They are just bad people. One for trying to ram through a deeply unpopular Brexit deal at all costs, thereby pushing the UK into year 4 of political and economic uncertainty, and the other for being a despicable cob. Their gift? Well Boris is PM and Corbyn is on the ash-heap of lousy leader choice history.



Greta Thunberg – Nice. Sorry Everyone


No. Not sorry. I like Greta. I don’t agree with everything she says or stands for. I like how easily she triggers and makes the old white guy cohort squirm and bleat and run around in circles in cataclysmic self-righteousness. All she has to do is show up somewhere and the rage and the anti-Greta people lose their minds. Anyway, Greta – I think there is a depth to the issues that she misses, but seriously folks, is it really that terrifying to have a young person so engaged in the major issues of the day? Is climate change a problem? Yes. Is it man-made? Not entirely but enough to make a difference. Are politicians playing a game as she claims? Absolutely – most don’t care about climate, it’s all about re-election. Should fossil fuel companies quake in their boots? No. Carbon-based energy will be required for decades. Does she have a point and should we listen to her? Absolutely. Our kids are being raised to be activists. Social media connects them. They are less than a decade away from kicking us to the curb. Pay attention. The gift to Greta? People listening and engaging. And an apology on behalf of old white guys everywhere. We aren’t all that thin skinned and frightened. I can defend my energy industry and hear your words. And find the path forward.


Justin Trudeau  – Naughty, but probationary.


There was a lot of debate on this one. Where does he fit? Great socks, fabulous selfies, but… a giant mess when it comes to policy implementation, pipelines under construction, an energy sector wondering which way is up with carbon taxes and renewables, military procurement gone totally sideways, relations with China, India and the US completely off the rails and an overtaxed economy running on fumes. Yeesh! What a year. On the other hand, he did win reelection and notwithstanding all the screeching from the right side of the political spectrum, there is actual construction activity on the provincial economy saving TransMountaing pipeline expansion. Plus we are all getting a tax cut. And he indicates a newfound willingness to work collaboratively with the provinces on their concerns. This is why he is probationary. There is no way to guarantee things last, but hey, it’s Christmas. Last year Trudeau got Jason Kenney as premier of Alberta as his gift, this year we give him #wexit, Bill 21 in Quebec, more Kenney, a nice pair of socks, a welding truck, an angry NDP and a leaderless (and angrier) Conservative Party. Tie it all together and earn a spot on the nice list.


Rachel Notley – Nice


It’s been a tough year for Rachel. On the one hand, she was been relentless in her defense of the TransMountain Pipeline and the Alberta energy sector. On the other hand she got her proverbial b*** handed to her by the Kenney led UCP. And now she finds herself yelling into a tornado on the other side of the aisle. Gift for Rachel? A political future – perhaps as the Liberal member for some Edmonton riding. The history books will be kinder to her short reign than many expect. Rest assured that even though Alberta may have shown you the door, your efforts were not unnoticed and were appreciated.


Jason Kenney – Naughty


I know a lot of people won’t be happy with this, and it was debated pretty intensely, but Jason needs to work to get on the nice list. As the new Premier of Alberta, Jason has a lot of responsibility. He has accomplished a tremendous amount in a very short time to implement his vision in the Alberta government and change is sometimes difficult and people will get upset.  But the path there was littered with not so nice shenanigans and so much of what has been going on since seems so mean-spirited and tone-deaf.  War rooms, confrontation with Ottawa, Fair Deals – this all plays well to the base, but the base isn’t going anywhere. Cutting by freezing and head faking about it isn’t fooling anyone. Look, I get Alberta has a spending problem and that maybe the province needs to be “run like a business” but, newsflash – Jason Kenney has never run a business, neither, it appears, have many or any of his henchmen. And in today’s world, businesses aren’t run like some Dickensian factory – they are actually quite employee-centric and often sacrifice the bottom line for the good of their workers. And they know that sometimes, when you run a business, you need to raise prices to meet revenue targets and take care of everyone. On the flip side, when you run a government, you don’t implement spending policies that have unintended consequences for the most vulnerable. It’s government 101. And if they are in fact intended consequences – own it. The UCP has plenty of good ideas but they should slow down and implement incrementally. The UCP also has plenty of bad ideas that should find a scrap heap. Gifts for Jason this year include patience, humility and some low poll numbers to bring him back to earth. I am hopeful he will learn as he grows into his role, but he’s not there yet. Jason Kenney and the UCP are on the right track, but they are currently a runaway train and speed kills.


Andrew Scheer and the Conservative Party of Canada – Naughty


It’s hard to say what went wrong for Andrew Scheer as leader of the Conservative Party of Canada, but Thursday’s announcement that he was stepping down as leader was at once surprising and a given. The circumstances are pretty wacky if you ask me. The using of party funds to send his kids to private school should be raising alarm bells of fraud or embezzlement, but they aren’t. This suggests to me that this type of thing is in fact not unusual and that what really got him shown the door was his combative speech in Parliament on Wednesday and his intransigence with the party elders on wanting to remain leader until April. My gut feel? The bigwigs wanted him out, he said no and they stabbed him in the back, leaking the payment thing, forcing him to resign. And they lost an election they should have won. Naughty all around. Their naughty gift? At least two years of sock chasing and a leadership context that attracts all the “best” elements of the conservative party.


Shale Oil – Naughty and Nice


Wait. What? How can shale be on both lists? Well, shale as a general rule has been on the naughty list since 2014 when runaway production growth upended the energy market and caused our current five year disaster. In particular the Permian has been a blackhole for capital, sucking up investment that might otherwise have gone elsewhere (Oh Canada!) all in the relentless pursuit of production growth at all costs, right here, right now. But the light tight oil moment, such as it was, appears to coming to an end. Which is nice. Look, production and investment in US light tight oil plays is going to continue, there is no doubt about that, but with capital discipline now being applied by lenders and investors, the go-go days are for now in the rear-view mirror. But, American energy independence right? Anyway, shale’s gift? Capital discipline, humility and maybe some free cash flow finally, but not too much because they’ll just lose their minds again.


Oil and Gas Investors – Nice


In the face of terrible pricing and an all-out war against the fossil fuel industry, most oil and gas related equities have performed as would be expected – terribly. While I ma sure they have been tempted to roll their entire portfolios over into cannabis stocks, oil and gas investors haven’t and maybe, just maybe, the greatest value play in history will pay off this year. Gift? Positive performance and a bit of a breakout.


Canadian E&P’s – Naughty


Look, I know the price differential was soul-crushing and that is why so many of the Canadian E&P companies exposed to it lobbied so hard for curtailment to save the industry, jobs and quite possibly the whole freaking universe. And now many of them are making great money. And they got a big fat tax break. So what do we see? Layoffs before Christmas and lousy capital budgets for 2020. Look, I get it, business is business but if you’re going to cut anyway, don’t act like you are doing anyone a favour. Gift – an employment crisis in 2020.


Saudi Arabia – Nice


Saudi Arabia did a fine job this year being respectful of the “cuts” they made to oil production in their largely self-serving goal of raising prices to pump their IPO valuation. And they have kept the greater OPC and OPEC + crew in line and the resulting stability has allowed the Canadian energy sector to survive even if they keep laying people off. An appropriate gift in return for keeping prices steady? Future decades of high oil prices and a $4 trillion valuation for Saudi Aramco.


Trans Mountain Expansion – Nice


Pipeline projects in general have been nice this year, especially if you measure niceness as a function of patience and calm in the face of absurd opposition. I don’t know how you can file an application for a project, spend a billion dollars, get denied for political reasons, spend another billion, become a political football, get denigrated, demonized, misrepresented and otherwise vilified for years and still be at the table with a smile on your face, ready to spend capital to create jobs, opportunity and prosperity for the biggest set of ingrates that exist. And that was before the Federal Government bought it. Now the Federal government, sorry, all Canadians, own a pipeline and a project to help capitalize on our shared Canadian wealth and we are being subjected to the same special interest driven obstructionism. Twice delayed, thrice approved, still being appealed but mercifully under construction since the end of August, TMX sure belongs on the nice list. And a great present will be the proverbial shovel and some peace and quiet to go about business..


Energy East Revivalists – Naughty


These folks were cute last year and they are indeed very earnest. Unfortunately, they also suffer from the delusion that this massive project has a snowball’s chance in hell of being resurrected. The proponent is out. The refinery the product it was going to is out. There is no will to fight the political battle to make it happen. And ultimately it doesn’t make sense anyway. Get me to ports on the West Coast and the Gulf Coast and we can talk about maximizing value. Build a pipeline to the East and sell discounted oil to a New Brusnwick refinery? Sounds like a stellar plan. Gift: A map of actual refineries that actually want Canadian heavy oil.


Quebec political leaders – Naughty


Ah, the premier of Quebec. A businessman. A conservative! A right winger! Surely he will be supportive of pipelines and be able to cut through all the hypocrisy that is Quebec’s position on Alberta oil, it’s existing refineries, the carbon and methane bomb that is the flooded James Bay, the massive demand for fossil fuels that drives Quebec’s economy, the resentment many in Canada feel at Quebec’s special kid-glove treatment and equalization payment buffet. Nope, sorry. Wasn’t ever going to happen. Did no one pay attention to the provincial election? He pandered to the same people everyone else did. And his statement that there is no societal case for oil pipelines in Quebec? While offensive, it is 100% true. I’m not even going to wade into the whole Bill 21 fiasco. And now, thanks to Trudeau and a weak conservative alternative, we have a resurgent Bloc Qubecois and Monsieur Blanchet who, it appears, is planning to spend this minority government smugly asserting Quebec rights and hypocritically poking Alberta in the eye, just because. So a gift for these gentlemen? $13 billion in equalization payments so that they will please, pretty please, stop making life so hard for the rest of us…


Vladimir Putin – Nice


OK, I get it, his Vladness is a despot, but has he really done anything this year to merit a spot on the naughty list? Not really, I mean in this whole Ukraine affair he hasn’t really done anything overt – he really just lit the orange fuse and let it go. Sure there’s also global domination obsession and dirty moves in the Middle East, but that’s as much filling the void left by the US as anything – who would you rather have there? China? In fact, it’s arguable that his ability to control Russian oil production has been vital for the Canadian energy industry. Look, the naughty list is all about redemption – every year is a fresh start. So for Christmas this year Vlad gets to be President of Russia for another 600 years, a couple more billion dollars in his non-existent secret bank account and a date with Ivanka. Plus a lifetime supply of tear-away t-shirts and a horse so he can do the bare-chest/bare-back thing on a moment’s notice.


People in Calgary and the Energy Sector in Western Canada in general – Nice


It’s been a long five years. We can’t give you another boom, but I think it’s fair to say that the pieces are finally in place to allow for a recovery. Seriously, cautious optimism folks! Things are looking up!


#Wexit – Naughty


Seriously folks, what is this all about? What are you trying to accomplish aside from drawing attention to yourselves. Look, I get “western alienation” but this isn’t the way to solve it. I grew up in Quebec in the 1970s and 1980s. I lived through an actual referendum on separation. I know how divisive it can be at the family and personal level. I have lost valuable friends because of my position or their position. And Quebec is an actual distinct society, with a much better case for independence.


In Alberta’s case? What do you solve? Do you solve market access? No! Do you fix the differential? No! Do you reduce your taxes or change the size of the economy? No! Will you get to keep everything (like all the oil)? No! Will there be First Nations support? No! All the money you think you will save on equalization? It’ll just go to the new government. Will yelling at the top of your lungs about how hard done by Alberta is engender any sympathy from people across Canada? No! You come across as misguided crackpots and inevitably get labelled as Quebec hating racists. You want real constitutional change and a better deal from the Canadian government? I’ve got your back. Say you want to become a landlocked state with no egress solutions for all the fossil fuels we will still be selling to only one customer? Don’t waste my time.


Gift for these folks? An all-expenses paid trip to anywhere but here and muzzle. We don’t need you. You aren’t contributing to the dialogue. You aren’t.


That’s it folks. If I missed anyone, fire me an email or two!


Prices as at December 13, 2019

  • Oil prices are up for the week. WCS gap still high at ~ $20
    • Storage posted an increase week over week
    • Production down slightly
    • Natural gas storage above last year; approximately 5-year avg
  • WTI Crude: $59.93 ($59.09)
  • Western Canada Select: $39.27 ($38.30)
  • AECO Spot: $2.477 ($2.488)
  • NYMEX Gas: $2.272 ($2.306)
  • US/Canadian Dollar: $0.7578 ($0.7584)



  • As at December 6, 2019, US crude oil supplies were at 447.9 million barrels, an increase of 0.8 million barrels from the previous week and an increase of 5.9 million barrels above last year.
    • The number of days oil supply in storage is 27.1 compared to 25.5 last year at this time.
    • Production was down slightly for the week at 12.800 million barrels per day. Production last year at the same time was 11.600 million barrels per day.
    • Imports increased to 6.887 million barrels from 5.989 million barrels per day compared to 7.393 million barrels per day last year.
    • Crude exports from the US rose to 3.400 million barrels per day from 3. 135 million barrels per day last week compared to 2.274 million barrels per day a year ago
    • Canadian exports to the US were 3.510 million barrels a day
    • Refinery inputs fell during the week to 16.597 million barrels per day
  • As at December 6, 2019, US natural gas in storage was 3,518 billion cubic feet (Bcf), which is equal to the 5-year average and about 20% higher than last year’s level, following an implied net withdrawal of 73 Bcf during the report week
    • Overall U.S. natural gas consumption rose by 2% during the report week.
    • Production was flat for the week. Imports from Canada rose 5% from the week before. Exports to Mexico were up 2%for the week
    • LNG exports totaled 51 Bcf
  • As of December 13, 2019, the onshore Canadian rig count was up 15 at 151 (AB – 98; BC – 9; SK – 41; MB – 3; Other – 0). Rig count for the same period last year was 172.
  • US Onshore Oil rig count at December 13, 2019 is at 667, up 4 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States is down 4 at 129.
    • Peak rig count before the downturn was November 11, 2014 at 356 (note the actual peak gas rig count was 1,606 on August 29, 2008)
  • Offshore rig count increased 1 to 23.
    • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 84%/16%, in Canada the split is 63%/37%


Trump Watch: New Twitter target – Greta!

Kenney Watch (new!): Energy War-Room Opens 

Trudeau Watch (for balance): Pretty quiet. Met with Kenney. Wore rainbow socks.


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