Why Isn't Canada Cutting Oil Production?

Donald Trump’s ambitious plans to resuscitate the United States’ once-dominant coal industry show no signs of materializing so far, as utility companies didn’t follow his battle cry, and there still… Due to oil sands resembling mining more than usual oil extraction, the resource base of companies operating there is much larger – CNR, to take but one example, reports 43 years’ worth of production with 20 billion barrels of oil equivalent in reserves. New investments in Canada’s oil sands are relatively rare, especially now that most oil majors (BP, Chevron, TotalEnergies, and others) sold their assets in Alberta, but that is due to Canada’s restrictive carbon regulations. Oil sands saw their breakevens around $50-52 per barrel before the COVID-19 impact and subsequent wars and sanctions, but by now, most producers are profitable at around $41-43 per barrel. Whilst Alberta’s oil sands require substantial capital expenditures upfront, once the projects are online, operational costs can be greatly reduced by means of autonomous mining vehicles, smarter water management, and AI integration. Canada’s oil sands giants, Suncor and Imperial Oil, have become North America’s lowest-cost producers, a key transformation in the upstream landscape as shale producers struggle to break even with new wells as WTI prices still linger around $65-68 per barrel. Why Isn’t Canada Cutting Oil Production? Canada’s oil sands giants, Suncor and Imperial Oil, have become North America’s lowest-cost producers, a key transformation in the upstream landscape as shale producers struggle to break even with new wells as WTI prices still linger around $65-68 per barrel. Whilst Alberta’s oil sands require substantial capital expenditures upfront, once the projects are online, operational costs can be greatly reduced by means of autonomous mining vehicles, smarter water management, and AI integration. Oil sands saw their breakevens around $50-52 per barrel before the COVID-19 impact and subsequent wars and sanctions, but by now, most producers are profitable at around $41-43 per barrel. New investments in Canada’s oil sands are relatively rare, especially now that most oil majors (BP, Chevron, TotalEnergies, and others) sold their assets in Alberta, but that is due to Canada’s restrictive carbon regulations. Due to oil sands resembling mining more than usual oil extraction, the resource base of companies operating there is much larger – CNR, to take but one example, reports 43 years’ worth of production with 20 billion barrels of oil equivalent in reserves. Trump’s Big Plans for ‘King Coal’ Might Run Aground Donald Trump’s ambitious plans to resuscitate the United States’ once-dominant coal industry show no signs of materializing so far, as utility companies didn’t follow his battle cry, and there still is no new US coal plant to be built in the upcoming years. There have not been new coal plants in the US since the 2012 commissioning of the Sandy Creek Energy Station in Texas, with nearly 166 GW of coal capacity retired across the country between 2000 and 2024. More than 75% of currently operating coal plants are 40 years old or more, exceeding their initial planned lifespan, with more than 35 GW of supercritical capacity in the US being more than 50 years old. US coal exports have also been on the decline, with H1 outflows dipping 7% year-over-year to 40.37 million tonnes, largely because Australia and Indonesia are closer to key demand outlets in Asia and have been outbidding US coal. With no workable export markets to expand into, the Trump administration’s ‘Beautiful Clean Coal’ agenda might only lead to extending operational lifespans for existing assets, with limited to no impact on coal mining and demand. Drone Strikes End Iraq’s OPEC+ Overproduction Nightmare The semi-autonomous region of Iraqi Kurdistan has long been Baghdad’s main headache as it tried to persuade OPEC+ peers that its constant overproduction was happening against its will, but that might end soon, and all it took was a couple of drone attacks. Drones, purportedly launched from Iraqi territory by Iran-aligned militias, have struck the Tawke, Peshkabir, Khurmala, and Sarsang oil fields in just two days, concurrently targeting the main gas power station in the region’s capital, Erbil. Interestingly, merely a day after the drone attacks came to an end, the Iraqi federal government announced that the Kurdish Regional Government agreed to resume oil exports through the Kirkuk-Ceyhan pipeline, following a prolonged halt that started in February 2023. Iraqi Kurdistan was believed to be producing 280,000 b/d before the drone attacks; but after five fields reported physical damage to infrastructure, the region’s output dropped to just 70-80,000 b/d. EU Sanctions Derail Russia’s Giant Refinery Sale in India The European Union’s upcoming 18th package of sanctions might inadvertently lower the global energy M&A landscape as it directly targets India’s Nayara refinery, majority owned by Russia’s state oil company Rosneft. Rosneft purchased a 49.13% in India’s second-largest refinery back in 2017, paying $12.9 billion for a 400,000 b/d plant in Vadinar as well as nearly 7,000 retail fuel outlets across the country. In recent months, however, Rosneft initiated negotiations with several regional majors, including India’s leading private refiner Reliance and Saudi Arabia’s national oil company Aramco, as it struggles to repatriate earnings from Nayara’s operations due to sanctions. Nayara has so far accounted for 16% of India’s imports of Russian crude oil in 2025 to date, importing some 285,000 b/d, and its inclusion in the European Union’s blacklist will probably scare off potential buyers. According to the EU’s sanctions, from now on, Nayara will not be allowed to export any refined products to Europe, leaving Reliance as the only Indian refinery able to do so, which should be a great boon for US diesel cracks, as the Gulf Coast will latch onto this opportunity. East Asia Doubles Down on US Oil Before It Gets Too Late Seeking to appease the Trump administration’s tariff frenzy, several East Asian nations have taken to maximizing US crude oil imports as a negotiation tactic, but some might be reaching the limits of these imports. Indonesia’s state energy company Pertamina signed a memorandum of understanding with the US on crude oil supply this month, whilst Thailand has already ramped up its WTI imports to 150,000 b/d, a 15% increase from a year ago. Even though South Korea has been trying to import higher US flows through state-owned entities, including barrels for its strategic storage, private refiners such as SK and Hanwha TotalEnergies signalled that they’d only buy US crude oil if it is more profitable than competing grades. The US’ light sweet benchmark WTI usually trades at a premium to regional competitors such as Murban, mostly reflecting the higher logistics costs, but in recent months, the premium dipped to just $1 per barrel, making WTI imports more palatable. US Reserves Dip Lower as Peak Supply Scenarios Loom Large According to the US Energy Information Administration, US proven reserves of crude and condensate dipped to 46 billion barrels as of end-2023, a 4% decline from the previous year’s record. Reserve additions have been continuous over the past decade, except for the 2015 price collapse and the 2020 pandemic impact, indicating that US oil growth is structurally set to plateau over the upcoming years. The single largest year-over-year change in US reserves came from the Bakken play in North Dakota, shedding more than 600 million barrels compared to 2022, whilst New Mexico saw the biggest increase with the net addition of 380 million barrels. The state of Texas accounts for 43% of US crude and condensate reserves (20.1 billion barrels), with New Mexico trailing in second place with a 15% share (6.5 billion barrels) and the Gulf of America closing the top three with 10% (4.6 billion barrels). The decrease in US natural gas reserves was even more marked than for crude, falling by 12.6% (or 87 TCf) from a year ago to 603.6 TCf, with every single large producing basin seeing year-over-year declines. Ruthenium Outshines Palladium and Gold to Become Top Metal of 2025 Ruthenium, one of the world’s rarest elements, rose to prominence lately as it doubled in price over the past year to $800 per ounce, becoming the best-performing metal of 2025 so far. Thanks to its particularly high wear resistance, ruthenium is an indispensable element in the production of chips and hard disk drives, and exponentially growing data storage needs ratchet up demand for the rare metal. Simultaneously, ruthenium is a key component in catalysts used to produce caprolactam, the feedstock to create nylon, and China’s booming chemical sector demand helped to trigger a massive shortage of the metal. Given that ruthenium is not traded on any exchanges, it has become exceptionally difficult to source it, also because it mostly comes as a by-product of platinum output, with a mere 30 tonnes produced in 2024. Some 80% of global ruthenium is supplied from South Africa, with Russia coming in second place, leaving supply for a key component of the upcoming AI revolution in very fragile hands.

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