Business
Production Cuts: Canadian Traders Scramble For Crude
Canada’s struggling oil market has found something of a lifeline, as traders scramble for heavy crude due to OPEC production cuts and sinking Latin American output. Output has fallen in Organisation of the Petroleum Exporting Countries and non-OPEC Latin American countries such as Mexico and Colombia, leading refiners as far away as China to look to Alberta’s oil sands to fill the gap.
The interest has boosted the price for heavy Western Canada Select (WCS) oil, which is within range of its tightest discount to US crude ever. Canadian heavy oil is an easy substitute for Middle Eastern and Latin American grades, and the rising demand represents a rare bright spot for the oil sands. They have been hit hard by falling prices and the high cost to produce and blend Alberta’s heavy, tar-like bitumen.
“We’ve been seeing a structural change in the market since OPEC cut medium sours, and Canadian heavy fits beautifully in there,” one trader at an oil sands company said. OPEC is attempting to re-balance global markets by cutting sour crude output, keeping light sweet barrels flowing as US shale producers are pumping at record levels. Output in Venezuela, an OPEC member, fell 11 per cent in the first five months of the year to a 27-year- low due to under-investment and infrastructure problems.
As political turmoil mounts there, the United States could impose sanctions that would hinder Venezuela’s ability to sell crude. Mexico’s production fell eight per cent in the first five months of 2017 from a year ago as a result of long-running natural production declines in aging oilfields.
Colombia’s dropped 11.5 per cent as a consequence of rebel attacks on pipelines.
Venezuela, Mexico and Colombia produce about 5.3 million barrels per day, while OPEC has cut about 1.8 million bpd in supply, most sour crude.
Canada exports more than 3 million barrels of crude daily to the United States, its No. 1 customer, according to US Energy Department data. Sending more Canadian oil to the United States may be difficult due to pipeline constraints, though more oil could be sent by rail, albeit at a higher price.
High costs and poor returns prompted international energy companies to sell around 22.5 billion dollars in Canadian assets this year.
OPEC cuts are now starting to bite in Asia, traders said demand for sour barrels was rising in a region that historically sourced oil from the Middle East and Russia.
The facility will be disbursed through participating Microfinance Institutions (MFIs), which will in turn extend the loans to their customers, particularly SMEs, as they directly interface with businesses at the grassroots level.
The Executive Director of COMCIN, Mr. Micheal Ogbaa who represented the Chairman, Dr. Iredele Oyedele (FCA, FCCA), said the initiative is designed to strengthen micro-lending institutions and expand access to finance for grassroots entrepreneurs, particularly women and youths in the informal sector.
Ogbaa explained that COMCIN does not lend directly to individuals but works through its network of microfinance and cooperative institutions, which in turn provide loans to end users.
“We came together to advocate for the microfinance ecosystem. Commercial banks often exclude people at the grassroots, but our members are positioned to reach them. This facility will empower them to do more,” he said.
He noted that the loan scheme offers low interest rates and flexible repayment plans, making it more accessible to small business owners.
According to him, about 90 percent of beneficiaries are expected to be women, who play a key role in sustaining families and driving economic activities at the local level.
“Our focus is on traders, service providers, and players in the informal sector. These are the real movers of the economy. By supporting them, we are strengthening families and contributing to national development,” he added.
Ogbaa disclosed that eligible SMEs with proven integrity and business track records could access up to N5 million each through participating micro-lending institutions. The rollout has commenced in Lagos and will extend to Abuja, Enugu, and other regions, including the South-West, South-East, and North-East.
He said 12 micro-lending institutions have already benefited from the scheme, while 85 applications are currently being processed under the pilot phase.
“Our target is to reach at least 100,000 SMEs nationwide. We are building a platform that connects funding partners with credible micro-lending institutions, creating a reliable channel for financial inclusion,” Ogbaa said.
He added that COMCIN is also working to attract larger funding pools from development finance institutions and private investors, noting that successful implementation of the pilot phase would boost confidence and unlock more capital for SMEs.
“We have seen encouraging testimonies from early beneficiaries. As we demonstrate transparency and efficiency, more institutions will be willing to channel funds through us,” he said.
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