Northern Oil Might Not Be Cheap for Long: Phillips 66 (PSX), Kinder Morgan Energy Partners LP (KMP)

Page 1 of 2

Phillips 66 (PSX)Canada has a problem. While it might have the world’s second-largest crude oil source, right now its oil is way too cheap. Before you start to get excited that the price might come down at the pump, I should warn you: The reason that oil is cheap is that its stuck up there. Blame the lack of pipeline capacity to take that oil to the refining marketplace. So, just how cheap is Canadian crude oil you ask? Take a look at the chart below:

Source: Enbridge (NYSE:ENB) Investor Presentation

A price differential that large — more than $40 — is causing producers to get creative to get Canadian oil to market. They need to be creative, because as tough as it is for current producers, it could get much worse. There is an impressive list of projects expected to begin production over the next few years. Among them is Exxon Mobil Corporation (NYSE:XOM)‘s massive Kearl oil sands project. The $12.9 billion project is eventually expected to produce 345,000 barrels of oil per day.

That oil, along with the myriad other production projects ramping up over the coming years, needs access to the refining market. The good news is that there are two catalysts on the horizon that, when taken together, should help provide a boost to the price of oil even as more of it starts flowing. While that might not be what your wallet wants to hear, it is better than shipping that oil to China or continuing to import it from the Middle East.

Increasing rail capacity and utilization
While Canadian producers aren’t fond of selling lower-priced crude, oil refiner Phillips 66 (NYSE:PSX) is working overtime to increase its access to this price-advantaged crude oil. For every dollar per barrel the company can save, it equates to $450 million being added to its bottom line. To help make this happen the company has ordered 2,000 rail cars to transport crude oil to its refineries. It also recently signed an agreement to have Canadian crude oil shipped by rail and then barge to its refinery in Washington State.

Source: Phillips 66

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!