Deloitte Canada Report Forecasts Two-Year Low for Oil and Gas Prices in Canada

Updated on January 14, 2024

To gain comprehensive insights into the topic, I recommend reading the article for detailed information on the projected decline in oil and gas prices in Canada as indicated by the Deloitte Canada Report.

Canadian Oil and Gas Prices Expected to Hit Two-Year Lows

As per a recent projection, oil and gas prices are anticipated to linger at two-year lows until 2024, offering potential savings for consumers on fuel and heating costs. This is attributed to abundant storage and a winter that was milder than expected in the previous year, contributing to lower global natural gas prices.

As outlined in a recent analysis predicting energy trends, the global oil prices are anticipated to stay low in the coming years. The Deloitte Canada analysis suggests that this decline may be linked to record output in the United States, production cutbacks by significant producers, and a slow pace of demand growth.

For a comprehensive grasp of the topic, it is recommended to read this article, providing detailed insights into the anticipated decline of Oil and Gas Prices in Canada to two-year lows, along with a thorough examination of the complete Deloitte Canada Report.

Oil and Gas Market Trend in Canada

Canada stands as one of the world’s prominent producers of gas and oil. In 2023, oil prices in Canada exhibited volatility, experiencing a nearly 16% decline since October. This downturn can be attributed to various factors, including a demand slowdown and an upsurge in global supply.

Given the nation’s emphasis on augmenting hydrocarbon output through increased upstream investment and expanded exploration endeavors for LNG production, there is an expectation of an increase in crude oil production. In 2020, Canada produced 165.2 billion cubic meters (BCM) of natural gas. However, the persistently low pricing in recent years has contributed to a decline in production.

In December 2023, the cost of gasoline in Canada decreased from 1.13 USD per liter in November to 1.12 USD per liter. The highest recorded gasoline prices in Canada were observed in June 2022 at 1.59 USD per liter, while the lowest recorded price was 0.41 USD per liter in December 1998. Over the period from 1992 to 2023, the average price per liter stood at 0.99 USD.

Oil and Gas Prices in Canada Overview

Complete Deloitte Canada Report

As per a recent analysis from Deloitte Canada, the West Texas Intermediate (WTI) oil (CL=F), the benchmark for the United States, is projected to have an average of US$72 per barrel this year. This forecast is influenced by a combination of rising production and decreasing demand. Notably, the company had estimated a figure of US$82.40 for the year 2024 back in October.

The Deloitte projection suggests that the drop in West Texas Intermediate (WTI) prices is likely to widen the gap between Edmonton Light and Western Canadian Select (WCS) in 2023. Faced with increased pressure, Canadian producers have significantly increased rail shipments of crude oil, particularly starting in the summer.

Gasoline prices continue to decline in Canadian cities. Deloitte Canada anticipates the benchmark AECO natural gas prices in Alberta to average $2.35 presently, marking a notable decrease from the $5.75 observed in 2022. Given that a significant portion of the funding for the provincial government of Alberta is derived from oil and gas royalties, a reduction in pricing translates to a decrease in revenue entering the public coffers.

In 2023, natural gas prices exhibited notable stability despite demand falling below expectations. Canada experienced minor output expansion during this period. Although projections do not foresee prices surpassing $80 per barrel, Deloitte anticipates that the average WTI price will maintain a low trajectory until 2026, with a slight increase in the years leading up to 2030.

Concluding Words

Oil prices have recently hit their lowest point in the last two years, nearly reaching the levels observed in 2021. This reduction in costs should bring relief to customers. The increase in energy costs, particularly for gasoline, has been identified as a significant contributor to the overall rise in inflation.

Botterill foresees a year dominated by supply dynamics. In 2024, there is expected to be a daily demand increase of nearly one million barrels. He notes that producers made substantial investments throughout 2023 to augment the available barrels for sale in 2024, even as demand is predicted to experience only modest growth. This situation could potentially lead to savings for consumers in terms of filling up their automobiles and heating their homes.

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