Weak Prices—Global oversupply led to a correction in oil markets last year, as the WTI price plunged in November and December. With soaring U.S. shale production, global oil supply will slightly exceed demand this year despite production curbs introduced by OPEC and its market allies. We project the WTI price to average US$55 in 2019, down from US$65 last year.
Production Cuts in Alberta—To counter the effects of a widening differential between U.S. and Canadian oil prices, Alberta’s government introduced production cuts, starting on January 1, 2019. We project that the cutbacks will result in no growth in Alberta’s oil production this year. However, the production cuts have helped to lift prices, which will offset the impact of the lost production gains.
Weakness in Investment—With the outlook for profitability weak and stricter rules for environmental assessment, capital investment in Canada’s oil industry will decline for the fifth year in a row in 2019. Major foreign companies have been leaving and there is a lack of oil sand projects in the pipeline. The result is that investment in energy projects will slow down considerably over the medium term.