One Third of World’s Crude Selling For Far Less Than WTI-Brent

I never trusted those Canadians from up north. I used to have a client who owned wells near Canada and he’d always bitch and moan about “that cheap Canadian crude” selling for 20% less than current market prices. Apparently, the Canadians are whoring themselves out for really cheap prices, almost like a terrorist regime.

Oil has slumped to levels last seen in the global financial crisis in 2009 amid a global supply glut. While the prices of benchmarks West Texas Intermediate and Brent hover in the $30s, they represent a category of crude — light and low in sulfur — that is more highly valued because it’s easier to refine. Some producers of thicker, blacker and more sulfurous varieties have suffered heavier losses and are already living in the $20s.

A blend of Mexican crude has plunged 73 percent in 18 months to $27.74 on Dec. 11, its lowest level since 2004, according to data compiled by Bloomberg. Venezuela is experiencing similar lows. Western Canada Select, which is heavy and sulfurous, has slumped 75 percent to $21.37, the least in almost eight years. Other varieties including Ecuador’s Oriente, Saudi Arabia’s Arab Heavy and Iraq’s Basrah Heavy were selling below $30, the data show.

Most places in the world, a lot of the producers they don’t really get the Brent price, and they don’t get the WTI price,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by phone. “It’s really a dramatic situation that really cannot continue for a very long time for many producers.”

After reading stuff like this, and how ISIS is selling their crude for 1/4th of market prices, I get the sense that producers are panicking, willing to accept any price for their wares. In a liquidation, things need to get real messy before a bottom is put in. Perhaps that’s what we need then, a good old fashioned rate hike to stoke the flames of illiquidity, forcing ham and eggers to halt production and go away.