Canadian Industrial Outlook: Oil Extraction—Summer 2018

The Conference Board of Canada, 18 pages, August 29, 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 Rebalancing—Global oil markets will return to equilibrium in 2018, after a year of excess demand and increasing prices. Although OPEC production will remain flat due to production outages in several member stages, U.S. shale production provides ample capacity to balance supply and demand. Indeed, a slight supply overhand is anticipated for 2019, which is expected to drive a slight decrease in oil prices over the course of the year.
  • Pipeline Bottlenecks—With increasing production leading to bottlenecks in pipeline capacity, the differential between U.S. and Canadian oil prices has increased and is projected to persist until new pipelines are built, costing Canadian producers billions of dollars in foregone revenues.
  • Weakness in Investment—With the uncertainty caused by a lack of pipeline capacity, companies have been reluctant to invest in new production capacity, even though increased oil prices have boosted revenues and positive profits are projected for 2018. This weakness undermines the industry’s ability to generate revenues in the long run.

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