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

The 10 Biggest Airports in the World

The 5 Most Gang Infested Cities In America

The 34 Smartest Countries in the World

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

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!