Crude prices will gain as WCS differential narrows on lower dependence on US refineries
Canadian crude oil prices should benefit from the TMX pipeline beginning to transport 590,000 barrels per day for export.
A new forecast from Deloitte Canada's Resource Evaluation and Advisory (REA) group says that as much of the additional export volume will be from non-US markets, Canadian producers will be less reliant on US refineries and the WCS price differential will narrow.
"The extra capacity created by the TMX pipeline is expected to boost Canadian production by about 375,000 barrels a day over the next two years," says Andrew Botterill, national Oil, Gas & Chemicals leader at Deloitte Canada. "That's more than the total amount added over the last five years."
Globally, crude is trading at elevated rates – the international benchmark Brent Crude is trading at above $86 per barrel – and the analysis expects this to continue even as US and Canadian production increases.
"The extra supply of North American crude will likely continue to be offset by voluntary supply cuts from some OPEC+ member countries, moderating any downward pressure on prices," says Botterill. "We saw the same thing happen this summer, when oil prices surged even as U.S. production volumes recovered to near pre-pandemic levels and exports rose from Iran and Venezuela."
Natural Gas has a less optimistic outlook according to Deloitte Canada.
This is informed by predictions of warmer winter months, strong production in the US and Canada, and high levels of storage in Europe.
Clean energy transition
With the clean energy transition underway, there is more effort required from public and private organizations according to an article within the report.
Public and private sectors will need to work together and share the costs and challenges of moving to a low-carbon economy.
"Public-private partnerships have at times allocated too much risk to the private sector, but we can learn from the past so organizations work together as true equals," says Botterill. "Then the market can prioritize the best projects to pursue and how each of them can contribute to our collective success."
