Oil could be headed back to US$100 a barrel this year: industry experts

TORONTO –

A shock manufacturing minimize by the Organization of Petroleum Exporting Countries and its allies (OPEC plus) is only one issue lifting the spirits of Canada’s vitality sector executives today, as consultants say crude costs may return to US$100 a barrel later this 12 months.

“Buoyant” and “extremely positive” had been among the phrases utilized by CEOs on Tuesday to explain the temper at a serious oil and fuel convention in Toronto, which befell simply two days after the surprising transfer by OPEC despatched oil futures surging.

It was only some weeks in the past that oil costs fell to the mid-$60 vary as a result of issues over financial institution failures south of the border.

But the OPEC news has despatched the worth for North American crude benchmark West Texas Intermediate (WTI) above US$80 for the primary time since January. And attendees at Tuesday’s convention sponsored by BMO and the Canadian Association of Petroleum Producers (CAPP) talked a couple of potential return to triple-digit oil costs by the autumn.

“I think this was a bit of a shock to everyone with how quickly it happened,” mentioned Craig Bryksa, CEO of Crescent Point Energy Corp. — which final week introduced it has reached a deal to purchase Spartan Delta Corp.’s Montney oilfield belongings for $1.7 billion — in an interview.

“That being said, the mood at this conference is extremely positive. There’s a little bit of a spring in everybody’s step.”

Canadian oil and fuel firms reaped document income in 2022 because the battle in Ukraine and world fears about vitality safety drove commodity costs sky-high within the spring of final 12 months.

But costs have been weighed down to this point in 2023 by uncertainty over the stickiness of worldwide inflation and the prospect of a coming financial recession.

However, BMO Capital Markets’ head of vitality Bradley Wells mentioned the financial institution has all the time had a bullish outlook for the Canadian vitality sector for this 12 months, based mostly on what it believes is tight world provide and an general lack of funding in oil and fuel manufacturing over the previous a number of years.

He mentioned that OPEC’s introduced minimize of greater than one million barrels per day may simply tilt oil costs into $100-per-barrel territory inside just a few months.

“That’s certainly a possibility, by the end of this year and into the next year,” Wells mentioned in an interview. “It’s definitely on the table again.”

“It’s a tight supply-demand dynamic to begin with, so when you’re talking about (OPEC’s cut), it’s not a rounding error. It actually is significant.”

For oil and fuel executives, volatility has been the secret for a lot of the final decade, so the OPEC news by itself is not sufficient to get most of them to pop the champagne.

“It depends on how long you’ve been doing this, how many cycles have you seen, how much scar tissue you have,” mentioned Ian Dundas, president of Enerplus Corp., on Tuesday.

But Jonathan Wright, CEO of NuVista Energy, mentioned there is a feeling amongst many within the trade that after almost a decade of downturn, Canadian oil and fuel is again.

“I would say even without the OPEC cuts … there’s a lot of analysts calling for quite an increase in oil prices through the second half of the year,” Wright mentioned in an interview.

Wright mentioned he believes the battle in Ukraine and its have an effect on on world vitality provide present that world funding in oil and fuel has not grown on the fee it must.

“And that’s because of everyone investing in green (energy), and forgetting that we still need oil and gas,” he mentioned.

“I hope we can find some balance in the middle, because if we don’t, we’re going to end up having shortages.”

In March, CAPP forecast that oil and pure fuel funding in upstream manufacturing in Canada will hit $40.0 billion in 2023, surpassing pre-COVID funding ranges.

In February, the International Energy Agency mentioned world oil demand is forecast to rise by two million barrels per day in 2023.

But the IEA additionally predicts that whereas world oil demand will rise annually till 2030, it would peak quickly after as electrical automobiles and effectivity features undermine demand.

This report by The Canadian Press was first revealed April 4, 2023.