Canadian Industrial Outlook: Oil Extraction—Winter 2018

The Conference Board of Canada, 17 pages, April 5, 2018
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This report examines the short-and medium-term economic and profitability outlook for Canada’s oil extraction industry.

Document Highlights

  • Market Fundamentals—Global demand for crude oil is projected to increase this year. Supply growth will come primarily from non OPEC countries, as OPEC continues to curb production to support market pricing. Oil markets will remain balanced, with a supply overhang restricting near-term pricing.
  • Back to Profitability—Prices are recovering, and Canadian production is rising thanks to the non-conventional sector. Cost increases are expected to be modest as the recent crisis has forced producers to become leaner. Higher production will outweigh increased labour costs and help the industry return to profitability this year.
  • Pipeline Bottlenecks—As pipeline capacity cannot keep up with growing production, more oil has to be shipped by rail at a higher cost. This causes a high differential between Canadian oil prices and other global benchmarks, resulting in more than $10 billion in forgone profits this year. No relief is expected until 2019, when new pipeline capacity becomes available.

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