Canada’s pledge to contribute 23.6 million barrels of oil to the International Energy Agency’s coordinated release will add little new supply to an already tight market because the volumes are not incremental, BMO Capital Markets said in an interview with Bloomberg, adding that the barrels in question were coming from production growth that was already in motion before the Iran-driven disruption.
“It’s not really a function of what’s happening in Iran or any request from the federal government to say, what can we contribute to this,” Randy Ollenberger, head of oil and gas research at BMO said.
Unlike the United States or Japan, Canada does not hold a strategic petroleum reserve, so it cannot release stored crude in response to a supply shock. What it is offering instead is output that was already scheduled to come online this year.
BMO’s Randy Ollenberger put it plainly: these barrels are tied to projects that were underway well before the current crisis. They are not the result of a policy decision to increase production in response to the Strait of Hormuz disruption or the broader Middle East supply loss. In other words, these were barrels the market already called for prior to the crisis.
That doesn’t even touch on the fact that Canada is entering spring maintenance, when oil sands operators take planned outages that reduce production to seasonal lows. Those maintenance programs are set years in advance and are difficult to shift on short notice. Cenovus, one of the country’s largest producers, has already indicated it will not alter its schedule in response to the current crisis.
Pipeline capacity is already maxed out. Even if production ticks higher, there’s nowhere for those extra barrels to go. No spare takeaway, no quick fix.
So the headline number lines up with the IEA’s 400 million barrel release, but the impact doesn’t. Canada isn’t suddenly flooding the market. It’s just continuing on the same path, with the same constraints.
By Julianne Geiger for Oilprice.com
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