Bear Market in the Canadian Oil Market


bear2   bear1

I have been a bear when it comes to Canadian oil companies. My view hasn’t changed much because our biggest customer is the U.S. and fracking has made importing oil from us less important. Plus the only way to get it there is by rail which is more expensive than by pipeline. Remember that 99% of our oil exports goes to the U.S. and our oil trades at a discount to WTI.

The keystone pipeline looks like it will not be approved until Obama is out of office and it will take another few years to build. The provinces, Federal government along with our native Indians are still fighting over the Northern Gateway pipeline. I have no idea if or when it will be built. We have two refineries in the east and no oil pipeline linking them to Western Canada

We don’t have any exporting LNG plants operating in Canada. We are still 3 to 5 years away from building one in British Columbia. The Bank of Canada is basing its monetary policy on the price of oil staying around $60 for the next two years. Not very bullish in my mind.

Canadian oil companies may bounce back when oil prices come back up but long term, we are years away from exporting oil & gas to other areas in the world.



2 thoughts on “Bear Market in the Canadian Oil Market

  1. I have to say that I am under no illusion with respect to understanding macro conditions, the closest I ever came to thinking demographically was when I bought Harley. That worked out well; Winnebago, not so much.

    With that out of the way, I’m partial to my spreadsheet and calendar methodology to maintain my ‘Dogs of the TSX’, but it did result in some large-ish exposure to oil. Dividends are good (so far), but, yeah, getting into a beat up sector by virtue of a dividend yield benchmark can be disquieting. Like banks in ’09, LifeCos in ’12 …

    I like your blog, especially with your background


  2. Thanks for stopping by, the dogs of the TSX may still work for you short term even with oil stocks. The big oil companies will be smart enough to buy out the small junior companies. I just wouldn’t hold them long term.


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