There’s a party going on as global crude prices rebound this year, yet Canada’s oilpatch is still waiting for the music to start.
As Stampede winds down and the second half of 2018 gears up, the country’s oil and natural gas industry is receiving a series of contradictory messages.
Conditions are generally improving — from stronger oil prices to progress on building much-needed pipelines — but it could also be a whole lot better.
“It’s boom time in Denver. It’s boom time in Houston. I’ve never seen it that busy,” said Ian Nieboer, a director with RS Energy Group, a Calgary-based data and research firm.
“Calgary doesn’t feel that way today. But we have good assets … and we have to keep grinding it out.”
Mixed signals and plenty of volatility face Alberta’s energy sector.
Oil markets have whipsawed in recent weeks because of geopolitical issues, production outages and rising demand. West Texas Intermediate crude topped US$75 a barrel earlier this month, plunged almost $4 Wednesday amid rising global trade tensions, and closed Thursday at $70.33.
Prices are up sharply this year and the relatively low value of the Canadian buck has vastly improved the economics for oil producers.
Analysts believe there’s more upside ahead, particularly because of declining output from Venezuela, the expected impact of U.S. sanctions on Iranian oil exports and questions surrounding spare production capacity within OPEC.
“The market is itching to take the price to $100. I think it could go well over $100,” Peter Tertzakian, executive director of the ARC Energy Research Institute, told a conference in Calgary this week.
“I don’t think that’s a good thing for our business, nor is it long-term sustainable. It’s just a recipe for it to come down again.”
Such a spike would slow global economic growth and crimp demand, although in the short term, cash flow levels for petroleum producers would rise.
At the TD Securities energy conference, CEOs with intermediate-sized producers seemed reluctant to consider opening the spending taps later this year, planning instead to deleverage balance sheets, look for strategic mergers and acquisitions, or return money to investors.
While economics are robust today, spending isn’t keeping pace with oil prices and bigger capital programs likely won’t occur until 2019 or 2020, predicted Grant Fagerheim, chief executive of Whitecap Resources.
“I think there is caution,” he said after the event.
“Canadian energy producers on the oil side are conservative by nature and we’ll walk our capital programs up, versus getting very aggressive, …read more