Today’s low crude oil prices are affecting the energy business, and you might wonder what that means for Suncor’s Commerce City refinery.
“The current market conditions are actually good for the refining business,” says Shelley Powell, VP of the refinery. “One of our biggest costs is the crude oil that we turn into gasoline and other products. So when feedstock prices go down, that can help us.”
Overall, Suncor is positioned to ride out the market conditions thanks to its integrated business model. That means the business includes the upstream, which mines and produces the crude oil, and the downstream, which refines it.
“When the refinery runs well, we can provide stable cash flow for the upstream,” Shelley explains.
Some perspective on crude oil and petroleum products pricing
Crude oil prices are based on two standard “benchmark” grades. West Texas Intermediate (WTI) is used for North America, while Brent crude from the North Sea is the international standard for crude oil shipped by water.
Pricing is all about supply and demand.
“This past summer, demand for petroleum products, including gasoline, was strong,” says Aaron McDowell, director US crude supply & trading. “That’s partly because crude oil prices are low, but also because the U.S. economy is strong. As well, the Chinese and Indian economies are still experiencing growth.”
“Meanwhile, extra production of crude oil from the Middle East, new producing oil fields in North America and a lack of storage mean we have a supply glut, which we expect to last until sometime in 2017. With the current oversupply, we expect WTI pricing to continue to be challenged.”
Aaron adds, “Overall, we expect the downstream business to remain strong, particularly here where we have Colorado’s only refinery.”
Focus on Operational Excellence
Crude oil prices have a history of fluctuating, which is beyond our control. So while Suncor weathers this cycle, our focus is on the areas we can control. That means operating safely and reliably, protecting the environment and being a good partner to the community around us. We’re also watching capital spending and reducing costs.
“This year, our refinery has improved our safety and environmental performance, and we set a production record in the first half of the year,” Shelley adds. “That reflects our ongoing focus on operational excellence.”