Weak manufacturing data from China and a US economy deemed to have "significant downside risk," saw benchmark North American crude futures dropmore than $5 to just above $80 a barrel, bringing the discount to international oil prices to more than $25.
The biggest oil sands player, Suncor Energy (TSE.SU), tumbled 6.8% to C$26.21 on the Toronto Stock Exchange, bringing its year to date losses to more than 30%. Canadian heavy oil - all of which goes to the US - sells for $15 less than US crude, meaning oil sands developers have to deal with an effective oil price of $60-$70 a barrel that puts at risk many of the $100 billion of projects on the go in Alberta.
Canadian Natural Resources (TSE:CNQ) gave up 3.35%, Imperial Oil (TSE:IMO) shed almost 2% while Cenovus lost 3%. The Toronto bourse's index of energy shares ended the day at its lowest level in more than two years.
Suncor ended Thursday down 6.8% at $26.21 with more than twice the usual number of shares changing hands. The Calgary-based company has 1.57 billion shares outstanding and is worth $41.25 billion. The counter touched a record high above C$70 in May 2008.
The hotly debated $7 billion, 3,190km Keystone XL pipeline connecting Alberta's oil sands to refineries on the US Gulf Coast and the proposed pipeline to the northern BC coast to service Asian markets should help Canada move closer to the international North Sea benchmark for crude instead of US pricing. On top of the spread between West Texas Intermediate and Brent of $25, Canadian heavy oil attracts a discount to WTI of around $15.
The question is how many of the $100 billion of oil sands projects in various stages of development will be completed or run at a profit when Canadian crude only attracts $60-$70 a barrel and could go lower.
Canada currently pumps 2 million barrels per day to the US, with more than half coming from the oil sands.