Irving refinery scored 'free' oil from historic price collapse, according to Higgs

It was the darkest of days for Canadian oil producers in April when western crude prices freakishly dropped below $0 per barrel, but it was a windfall for buyers and Irving Oil Ltd. jumped on it, according to New Brunswick Premier Blaine Higgs.

"I worked in the refinery for manyyears and apparently in the last month there was actually a free load of crude oil that came through the Panama Canal," said Higgs, while speaking remotely to a business audience two weeks ago.

"Now they had to pay transportation, but imagine negative cost for crude."

Irving Oil has not confirmed the story and did not respond to an email inquiry asking for information about it.

But in April a series of market events mostly in the U.S.culminated with holders of futures contracts of West Texas Intermediate (WTI) crude oil, offering product theywere obliged to accept delivery of in May for free, or less.

At the market low point on April20, sellers of contracts that were timed to lock in on April 21 were offering to pay more than $30 per barrelto anyone willing to accept deliveries of crude oil tied to thecontracts that were coming in May and had no where to go.

"They have to pay you to take their oil, which was up to $35 per barrel.It was just an interesting point in history," U.S. billionaire Carl Icahn told BloombergNews about deals he made for his own refinery during the April giveaway.

"It was really fascinating. You'll never see anything like that in history again Idon't believe."

Traders were caught by a collapse in demand for oil caused by sudden COVID-19 economic shutdowns that began unexpectedly in March.

A worldwide glut of crude had been building for months prior to the pandemic and on-land oil storage facilities around the globe were already near capacity.Across the world's oceans fleets oftankers filled with oil were also being paid to float around and wait for buyers.

It was all a disaster for investors who ownedthose April futures contracts which required holders to accept the receipt of crude deliveriesin May but for which there was no market.

The result was negative prices that shocked an already batteredindustry.

Brian Schmidt, president ofCalgary oil producer Tamarack Valley Energytold CBC News at the time it was hard to take.

"These are very difficultdays and yeah, I looked at that board today and saw that negative number and thought, this is crazy," said Schmidt.

But for those able to accept delivery of oil, it was the oppositeahistoric windfall.

IrvingOil has six million barrels of storage capacity at an onshore tank farm next to its deep water oil tanker offloading facility at Canaport in Saint John.

That's about an 18-day supply for its nearby refinery when operating at full production, although how much of that space could have been freed up to take advantage of negative prices is unknown.

According to Port Saint John records, 11 tankers carrying crude oil with capacities between 500,000 and twomillion barrels have unloaded at the Canaport terminal since theend of April, although which of those Higgs was referring to, if any, is a mystery.

Higgs said since the refinery was commissioned in 1960, it had never accessed cheaper product.

"Thatwas not something imaginable when the refinery was built 59 years ago that it would ever be free," he said.