Canadian Industrial Outlook: Oil and Gas Extraction—October 2019

Oil prices remain weak—Global oil production will remain balanced this year. United States reaching a record-high production will more than compensate for production curbs adopted by OPEC and its market allies. This in turn will weaken the outlook for oil prices. We project that the WTI price will average US$58.00 in 2019, down from US$64.80 last year.

Extension of oil production cuts in Alberta—Alberta’s government has decided to extend production cuts until the end of 2020. The cuts came into effect in January 2019 and have helped reduce the differential between U.S. and Canadian oil prices. We expect the cutbacks to limit growth of Alberta’s oil production to 3.4 per cent this year and 3.8 per cent in 2020 compared with an estimated 3.8 and 4.1 per cent, respectively, before production cuts were introduced.

Soaring U.S. production weighing on gas prices—Shale gas production in the U.S. will increase at double-digit rates again this year, limiting growth in natural gas prices. On the bright side, the differential between Western Canada’s benchmark price for natural gas (AECO–C) and its U.S. counterpart (Henry Hub) has remained stable.