Crude Observations

Super Groundhog January Over Bowl Day

Are we actually doing this again? This is now the third week in a row where cockamamie outside events have made it impossible for me to write cogently about the state of the energy industry either here or abroad. What with the Super Bowl coming up on Sunday (more on that later of course), the ongoing coronavirus madness, the impeachment protocols and now, of all things, Groundhog Day to contend with, I am at a loss as to when I will ever get the chance to write about energy issues ever again.


Although, with prices heading the directions they are, perhaps that is a good thing. And what is happening with prices? A quick aside. There are many catalysts that move prices. Some move them up, some move them down. For example, the entire country of Libya coming offline because their export facilities are blockaded to the tune of almost 900,000 bopd – that’s a catalyst.


Another catalyst? Middle East tension. What’s that worth? Well the Houthis (Iran) are stepping up attacks on Saudi oil infrastructure (the US). That’s gotta be worth something?


China/US trade agreement, USMCA, recovering global growth. All a catalyst. In fact, all of these are positive catalysts which should goose prices by several dollars at least.


Unless… Unless there is some kind of coronavirus that is currently affecting less people than had the flu in Alberta since the current season started. In that case, the market completely abandons all semblance of reason and sells off by 10% since as we all know, any excuse is a good excuse to beat the stuffing out of oil prices.


Look, I get that consumption and global growth is a going to be impacted in the short term by all the quarantines and flight cancellations associated with this outbreak and that the WHO has now declared it a global public-health emergency, but the worst, worst case I saw for a decline in oil consumption is 2 mm bopd for two or three months. Which sounds bad, but it’s less than 2% of global consumption and not a permanent impairment in demand so… lighten up already!


At any rate, that is my energy “bit” for the week because I actually have three things I want to go on about, and they are kind of related. One of course is the Super Bowl – my favourite annual sporting event and chicken wing and chili gobbling fiesta and the other is sports related as well.


But first, Groundhog Day. Already, right? Seriously, isn’t it nice to be rid of January? Admit it. This is the first January I have been through that was in fact six months long. And if you haven’t disliked January 2020, you haven’t been paying attention.


So, let us prepare for this Sunday’s carnival of overstuffed rodents across the continent poking their heads out of cages or holes and indicating to the huddled masses whether spring will be early or late and letting us know whether we can move on from this mess.


Or can we? We’ll still have the same issues. Pipelines, curtailment, crude by rail, anemic capex, lousy pricing, carbon taxes, legal challenges, first nations consultation, Venezuela, Russia, Middle East chaos, US dysfunction (maybe not impeachment though!), coronavirus, Liberal hatred of Alberta, #wexit, #brexit – you name it. None of it ever seems to go away.


It plays on a permanent loop. Never any progress. We are stuck in a real world version of the movie Groundhog Day. Except the star isn’t Bill Murray. It’s us. Don’t believe me? I wrote a Groundhog themed blog three years ago!!! It’s excerpted below. I have changed it a bit to update references and remove some unneeded snark but it may as well have been written yesterday.


“Well, what if there is no tomorrow? There wasn’t one today.”


Or course this is a famous quote from the movie Groundhog Day, which I of course like to celebrate every year and will, until something changes in the energy industry landscape.


For those unfamiliar, Groundhog Day tells the story of Phil Connors, the egomaniacal, self-absorbed TV weatherman trapped reporting from Punxsutawney, Pennsylvania on Groundhog Day, who finds himself inexplicably repeating the same day over and over again no matter what he tries to do to alter his situation. Intertwined within this existential dilemma is salvation in the form of the love interest – the sweet and gentle Rita, and we all know that if Phil ever figures out how to win her over, he will solve his dilemna.


For fun, let’s pretend that Phil is an energy producer like, say, Alberta, and Rita is of course everywhere else.


We have, for want of a better description, been caught in a Groundhog Day moment for the better part of five years.


Whether it’s low prices, environmental issues, lack of market access… each of these seem to be running on an endless loop with no progress on any front.


“Do you ever have déjà vu, Mrs. Lancaster?”
“I don’t think so, but I could check with the kitchen.”


Ultimately though, the one topic that seems to dominate is that of infrastructure being proposed and pushed back. Where in years past it was Northern Gateway and Energy East, we are now in a loop that that includes Coastal Gas Link, Keystone XL and TransMountian. And no sooner did we put the BC provincial challenges to bed than we are suddenly staring at First Nations consultation issues. Again.


Much like many sector participants’ current views of our government and politicians, at the beginning of the film, Phil, secure in his superiority, looks down his nose at the traditions and needs of the quaint town of Punxsutawney.


“This is one time where television really fails to capture the true excitement of a large squirrel predicting the weather.”


Then as the same day repeats and the eternal recurrence deepens and becomes more absurd, his mood changes, his despair grows.


“You want a prediction about the weather, you’re asking the wrong Phil. I’ll give you a winter prediction: It’s gonna be cold, it’s gonna be grey, and it’s gonna last you for the rest of your life.”


When you think of it, the parallels are pretty interesting, from Stephen Harper’s “It’s a no-brainer” through the Keystone pas de deux to the fatalism of the energy industry regarding the TransMountain Expansion, the above quote could quite easily have been found in an analyst report. And it is the frustration that gives rise to “war rooms” and other populist anger channeling initiatives.


After Phil gets over the initial shock he blunders around trying to figure out how he will get out of his mess. He rages, he gives up. He gets rich, he steals, he buys insurance (Bing!) and steps in the same pothole every day.


He even kidnaps and kills the groundhog (“There is no way that this winter is *ever* going to end as long as this groundhog keeps seeing his shadow. I don’t see any other way out. He’s got to be stopped. And I have to stop him.”) and ultimately tries repeatedly to kill himself.


“What would you do if you were stuck in one place and every day was exactly the same, and nothing that you did mattered?”


All the while, he tries to hit the perfect stride with Rita, but he tries too hard, his efforts are contrived and he runs out of time. Then with each subsequent reliving, he gets more anxious, becomes manic and ultimately pushes her further away.


Sounding familiar? This is a lot like the last few years or so of pipeline advocacy with supporters (including industry players and government) coming off as increasingly desperate.


Phil Connors: Who is your perfect guy?
Rita: Well, first of all, he’s too humble to know he’s perfect.
Phil Connors: That’s me!


But the attraction is really there – Rita needs Phil as much as he needs her, much as Canada needs Alberta, energy and pipelines and vice versa. There is a karmic connection, if only the conditions are made right to let it happen…


And underneath all of this, Phil is finally learning. He is starting to understand that what it is that Rita wants is not necessarily what he is projecting on her.


So, after finally exhausting every last option and angle to get something for himself and make it happen under his own terms, he lays himself bare, he learns that by giving something of himself and allowing events to unfold as they will, he is finally able to have the perfect day and get the perfect girl – redemption, transmutation, transmogrification, Nirvana… a new day – take that Nietzsche.


Phil: Do you know what today is?
Rita: No, what?
Phil: Today is tomorrow. It happened


So is Alberta/the oil patch really Phil? Are we crusty on the outside but with a heart of gold on the inside once we let down our guard and learn it isn’t all about us? Can it happen like that for us? Can we convince the rest of Canada that we are who they want? Who knows. But the old way wasn’t working so I like to think so.


To get to the end result we want here in Alberta and for the oil patch and for pipeline proponents, we need to allow the process to happen, no matter how painful and no matter how frustrating or how often it seems like we are back at square one. We need to adapt to the world around us and not force it to play the game we are trying to define.


And maybe the clock changes over. Click. Brings a tear doesn’t it?


Speaking of moving on. Super Bowl LIV! No Patriots! Not only do we get a rodent forecasting the weather on Sunday, we are getting a new Super Bowl champion!


So, a few words about the matchup, some awesome prop bets and a prediction.


This year’s matchup features two supremely talented and enigmatic teams. And if you read my forecast you know that I picked neither to win, although I have since modified my prediction.


The Kansas City Chefs (I mean Chiefs – great googly moogly!) are the favourites to beat the San Francisco 49ers. By 1 point. The tightest spread in Super Bowl history.


Kansas City is quarterbacked by Patrick Mahomes, the Kermit the Frog voiced presumptive successor to Tom Brady as the greatest quarterback of all time. He is a magician running a high-speed aerial circus who can make any throw any time with any arm. San Francisco is a defence first team with a dominant line who survives on an absurdly creative running game. Ironically, San Francisco is the higher scoring team and Kansas City gives up way less points per game that the 49ers. Go figure.


To get to the Super Bowl, Kansas City came back a 24-0 deficit (in one quarter!) in the divisional finals and a further 10-point deficit in the Championship game – they score at will. San Francisco on the other hand mercilessly beat its opponents into submission through a combination of power running, ferocious defence and Richard Sherman tantrums.


The coaches come to the big game with a lot of baggage. Both are recognized as offensive geniuses… with flaws.


Andy Reid has been to the Super Bowl once, in Philadelphia, and lost. His playoff record is rife with questionable coaching moves, brain-dead clock management, improbably lost leads and heartbreak. But he’s never had a weapon like Patrick Mahomes and should have been in the Super Bowl last year if not for a late game offside penalty (see “heartbreak”) by a player who now plays for… the 49ers.


Kyle Shanahan is the son of legendary Broncos coach Mike Shanahan and is a true up and comer in this, his first, head coaching gig. Unfortunately, his current Super Bowl legacy can be summed up in two numbers – 28 and 3. That’s right, he was the offensive coordinator who abandoned the run game and allowed Tom (GOAT) Brady enough time to come back and beat Atlanta in the only Super Bowl game to go to overtime. Whoops!


So, lots of intrigue. Offence vs defense. Redemption vs redemption. First victory in a first Super Bowl appearance in 50 years for a long-suffering franchise beset by playoff curses. A return to glory for a storied West Coast franchise that was once this scribes absolute favourite due to a seminal pass from Montana to Clark.


And did I mention chicken wings?


Okay, prop bets and odds. Don’t know what prop bets are? Those are the bets that are done on in game outcomes or other things surrounding the game, like, over/under on the length of the anthem (2:04); how long the word “brave” will be held (0:08); will Demi Lovato have nail polish (“no” pays out at 180). Or more serious things like will the first score take less time than the anthem, heads or tails, first advertiser, will a fan run out onto the field. You get the point.


Anyway, since I will be running a small prop book at my house for the game (gotta teach the girls to gamble early!) here are a few of my own. The numbers show what the payout is for winning – so a 150 means a $1 bet pays $1.50


• Total points scored more than/less than the price of WTI at close on Friday. (120/180)

• Will the total amount of fumbles in the game be more than the Energy War Room logos (3) since inception. This pays at 185.

• Interceptions by Patrick Mahomes more than the closing price of NYMEX ($1.8) on Friday. Pays 225

• Most awkward Super Bowl tweet – Donald Trump 4/3; Justin Trudeau 7/4; Jason Kenney 12/5; Me 8/1

• Energy companies rebranding during the broadcast (the over/under is 3)

• Will the number of TD passes thrown by Chiefs QB Mahomes exceed the number of outstanding pipeline lawsuits and appeals against Canadian projects (currently at 5) (120/180)

• Will the length of the anthem exceed the amount of time my wife and daughters actually pay attention to the game (80/210)


Game Prediction?


I picked Kansas City in my revised forecast and I’m not going to change now. San Francisco keeps it close but Kansas City brings it home for the fans and their much maligned coach.


Final Score KC 38 – SF 27.




So the last thing I wanted to talk about is the tragic helicopter accident last Sunday that took the lives of former NBA Superstar Kobe Bryant, his 13 year old daughter and 7 other less famous but no less important people. But I’m going to anyway. Sorry.


I do a lot of driving and while I am doing that I listen to a lot of sports talk radio. Listening to these shows, I have been struck by the genuine outpouring of grief by announcers and callers alike for someone known for being as prickly and self-absorbed as Kobe was as well as someone most people had clearly never met. Which got me thinking. Why? Admittedly, most of the time I am relatively unmoved by celebrity deaths because the impact on my life is negligible and really, because I only know them as an abstract thing, the death of an actor, for example, is ultimately not much more traumatic to my immediate life than the death of the character they might have played on TV. If that makes sense.


But as I listened, and inevitably got drawn into the discussions, I started to get a better picture of who Kobe was or more importantly who he became and how his life has been shaped by his talent, his intellect and ultimately his family. This was a person who sat at the greatest heights of sports excellence and then completely reinvented himself into a second act after his retirement. And how this became interwoven into a whole generation of people across the world who aged alongside him.


For the record, I am a huge sports fan – and a Lakers fan, well really a Magic fan. For people of my vintage, Kobe has, for better or worse, been a part of my life almost as long as some of my longest personal relationships – for example my wife and children. If you have followed sports since 1996, you followed Kobe. His stature and excellence was inescapable. From his being drafted as a young phenom and teenager, to his first championships through his unconscionable sexual assault allegations to his second run of championships to his ultimate retirement I’ve “known” Kobe. But I haven’t really “known” him. I was observing him. Even worse, I was judging him as a sports thing. Not as a human being. Not as a man or a father. A stat line with an ego and a bunch of money.


But learning about his post NBA activities, you can and must take a step back and look at the totality of what he was about.


Like all of us, Kobe was deeply flawed – both on the inside and outside. He did some horrible things when he was younger which are unforgivable. But by all accounts, his wife found it within her to forgive him. So who am I to judge that circumstance? Isn’t the whole point of redemption and rehabilitation what you do after your transgressions? And in the years since that incident, aside from his obvious professional accomplishments, he led an exemplary off the court existence. He and his wife have had 4 children, all daughters. He has dedicated himself to them in a way that is all too familiar to many of the dads I know even if some of the things he did (creating and funding sports academies) is clearly beyond our means.


His dedication to his girls and the singular purpose with which he helped them pursue their goals is not only commendable, it was an inspiration to many.


But from my vantage point? As I alluded to earlier, it’s typical. Typical of a dad trying to do all he can to make his daughter’s life better. A dad doing what he was supposed to do.


It’s the dad driving the kids to dance or hockey or figure skating or skiing or basketball. It’s what I and most of my circle of friends do on a daily basis. It’s the routine.


When I started seeing the notifications about the accident, I was coming off the ski hill and was racing back to Calgary to get one of my daughters to a performance. In a way, I was doing the exact same thing that Kobe was doing when he died. It happened to him and his daughter. It could just as easily have happened to me.


It’s jarring when you think of it that way. Not only did we lose one of the top athletes of all time, we lost a dad and a daughter, in their prime, commuting to an activity. Doing the day to day that I do.


It was that thought that made it very personal to me. Sure I can understand in the abstract that it is sad that an athlete died so young. But a guy, who I “know” dying in an accident with his daughter, taking her to an activity she loved, doing what we all do so regularly…


Losing a daughter, that just makes me so very sad. As someone with two daughters who drives around from school to dance to home to dance to skiing and back again and has way too much time to think, it’s left a bit of a hole, but also a renewed determination to keep doing what I’m doing and to try not to complain as much as I normally do, because you never know when it’s going to stop. At least if I’m driving, I know I’m there for them. Doing my job, for my girls.


Two years ago, Kobe gave an interview backstage to an ESPN reporter who asked him if he was even a little upset he didn’t have any boys. His response was that he would have five more daughters if he could and he proudly self-proclaimed himself a “girldad”.


If you follow these things, you will know that #girldad has been trending all over social media. I’m a girl dad too. I get what he was all about and why. And that’s why this makes me sad.


Prices as at January 31, 2020

  • Oil prices continue downward on pressure from coronavirus news; WCS gap at $21; Coronavirus discount is $8 (guess)
    • Storage increased more than expected
    • Production remained consistent
    • Natural gas storage above last year; above 5-year avg
  • WTI Crude: $51.61 ($54.36)
  • Western Canada Select: $30.91 ($31.61)
  • AECO Spot: $2.28 ($2.31)
  • NYMEX Gas: $1.850 ($1.886)
  • US/Canadian Dollar: $0.7557 ($0.7608)



  • As at January 24, 2020, US crude oil supplies were at 431.7 million barrels, an increase of 3.6 million barrels from the previous week and a decrease of 14.2 million barrels from last year.
    • The number of days oil supply in storage is 25.9 compared to 25.2 last year at this time.
    • Production was flat for the week at 13.000 million barrels per day. Production last year at the same time was 11.900 million barrels per day.
    • Imports increased to 6.660 million barrels from 6. 432 million barrels per day compared to 7.083 million barrels per day last year.
    • Crude exports from the US grew to 3.509 million barrels per day from 3.414 million barrels per day last week compared to 1.944 million barrels per day a year ago
    • Canadian exports to the US increased to 3.845 million barrels a day from 3. 559 million barrels per day last week
    • Refinery inputs increased during the week to 15.924 million barrels per day
  • As at January 24, 2020, US natural gas in storage was 2,746 billion cubic feet (Bcf), which is 193 BcF above the the 5-year average and about 23% higher than last year’s level, following an implied net withdrawal of 201 Bcf during the report week
    • Overall U.S. natural gas consumption fell by 10% during the report week.
    • Production was essentially flat for the week. Imports from Canada decreased 9% from the week before. Exports to Mexico increased 13% week over week.
    • LNG exports totaled 75 Bcf
  • As of January 31, 2020, the onshore Canadian rig count increased 4 to 246 (AB – 171; BC – 19; SK – 53; MB – 3; Other – 0). Rig count for the same period last year was 164.
  • US Onshore Oil rig count at January 24, 2020 is at 675, down 1 from the week prior.
    • Peak rig count was October 10, 2014 at 1,609
  • Natural gas rigs drilling in the United States is down 3 at 112.
    • 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 held flat at 21.
    • Offshore peak rig count at January 1, 2015 was 55

US split of Oil vs Gas rigs is 85%/15%, in Canada the split is 64%/36%


Trump Watch: Impeach me if you dare! Didn’t think so.

Kenney Watch (new!)Red tape reduction special!

Trudeau Watch (for balance): I’m sorry, what do I have to deal with now?


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