Energy stocks drop, gas demand rises, and executives weigh political risks ahead of Canadian election
Canadian energy executives are confronting significant challenges as US President Donald Trump's recent tariffs and a volatile global market impact the sector, as reported by The Globe and Mail.
Oil prices have dropped to 3½-year lows, intensifying concerns about a potential global recession and adding complexity ahead of Canada's federal election.
In response to these developments, 14 oil and gas CEOs have written to federal party leaders. They are calling for the repeal of environmental legislation they say hinders pipeline construction.
These industry leaders also want the removal of caps on oil and gas emissions and the elimination of the federal carbon levy on large emitters.
They argue that such measures are necessary to facilitate the expansion of fossil fuel projects amid the current trade crisis.
At the BMO Canadian Association of Petroleum Producers Energy Symposium in Toronto, industry stakeholders discussed the current turmoil.
Peter Tertzakian, deputy director of ARC Energy Research Institute, noted that while the situation is serious, it does not surpass past crises like the 2008 financial meltdown or the 2015–2016 oil price wars.
Randy Ollenberger, head of oil and gas research at BMO Capital Markets, highlighted the unique nature of the current downturn, attributing it to policy-induced factors rather than traditional market cycles.
Despite the challenges, some Canadian energy companies remain resilient.
Eric Nuttall, senior portfolio manager at Ninepoint Partners, emphasized the strength of company balance sheets and low operating costs.
However, he cautioned that US shale companies operating below US$60 per barrel are likely to experience significant declines.
Jon McKenzie, CEO of Cenovus Energy, expressed confidence in the industry's ability to weather the storm, stating that while current oil prices are not ideal, companies have adapted by underleveraging balance sheets and maintaining competitive costs.
He believes that the situation is not an existential crisis and anticipates recovery over time.
In the natural gas sector, Chris Carlsen, CEO of Birchcliff Energy, pointed to positive demand projections, citing increased needs from AI and data centre operations, as well as the upcoming launch of LNG Canada.
He anticipates significant growth opportunities in the coming years.
Political factors also play a crucial role in the industry's outlook.
McKenzie stressed the importance of political leadership in supporting hydrocarbon energy as a backbone of the energy system.
Dean Setoguchi, CEO of Keyera Corp., highlighted the need for economic growth to address affordability concerns and expressed interest in how major political parties will approach energy development policies.
The S&P/TSX Capped Energy Index, a key benchmark for Canadian energy stocks, has experienced notable fluctuations in response to these challenges.
According to Blackrock, as of early April, the index has declined by 1.5 percent year-to-date, reflecting investor concerns over the impact of US tariffs and global market instability.
The iShares S&P/TSX Capped Energy Index ETF (XEG), which tracks this index, has also seen significant price movements.
Over the past two weeks, XEG has experienced a loss of approximately 12.81 percent, indicating the sector's sensitivity to current economic policies and market conditions.
These declines showed the heightened volatility in the energy sector, driven in part by the implementation of a 10 percent US tariff on Canadian energy exports, including oil, natural gas, and electricity.
While the US administration has exempted certain fossil fuel products from tariffs, the broader trade tensions have contributed to market uncertainty.
