Canadian Oilpatch Can Withstand Crude Market Doldrums, Experts Say

U.S. lipid producers will apt beryllium nan first to trim output should nan world crude value proceed to languish beneath US$60 per barrel, but their Canadian peers should beryllium capable to support chugging along, power experts say.

West Texas Intermediate, nan cardinal U.S. ray lipid benchmark, settled astatine US$55.13 per tube connected Tuesday, nan lowest nan value has been since early 2021.

The February statement has since regained immoderate ground, trading supra US$56 connected Wednesday afternoon.

Unlike during nan heavy of nan COVID-19 pandemic, economical woes are not dragging down substance request this time, said Rory Johnston, laminitis of nan Commodity Context newsletter.

“The irony of it is that request … has really been reasonably robust acknowledgment to a betterment successful China,” he said.

While members of nan Organization of nan Petroleum Exporting Countries (OPEC) and its friends unwind earlier accumulation cuts, output is besides rising successful nan United States, Canada, Brazil and caller marketplace entrants for illustration Guyana, said Johnston.

Supplies are besides building up connected nan world’s oceans arsenic tankers carrying crude from countries nether U.S. sanctions, specified arsenic Russia and Venezuela, float astir looking for buyers.

Prices would beryllium overmuch weaker if not for sporadic geopolitical turmoil that’s flared up this year, including nan Israel-Iran conflict successful June, Johnston added.

If countries facing sanctions extremity up reducing their output, it could thief bring world markets backmost into equilibrium, Johnston said.

Then, it would autumn to U.S. shale producers and OPEC+ to trim back. U.S. players are comparatively precocious cost, truthful they’d apt move first, he said.

Al Salazar, caput of macro lipid and state investigation astatine Enverus, agreed American producers will apt beryllium nan first to blink.

“OPECs sewage heavy pockets,” he said. “I deliberation they’re going to hold for nan U.S. producers to travel disconnected and person them equilibrium nan market.

Canadian lipid producers person been “battle-tested” by past downturns and person driven down costs to nan constituent that they tin withstand prices overmuch little than they are today, said Salazar.

“I fishy that our accumulation present is going to beryllium rather resilient contempt debased prices,” he said.

Cenovus Energy Inc., 1 of Canada’s biggest lipid and state producers, said successful its 2026 fund announcement past week that operating costs successful nan oilsands adjacent twelvemonth are expected to travel successful astatine $11.25 and $12.75 a barrel. Its offshore platforms successful Atlantic Canada, meanwhile, person costs of $35 to $45 a barrel.

Suncor Energy Inc. said its oilsands operations’ rate operating costs are expected to beryllium betwixt $26 to $29 a tube adjacent year. It is anticipating a full-year WTI lipid value of US$62 a barrel. Every US$1 per tube alteration successful WTI would person astir a $215-million effect connected nan company’s full-year outlook for 2026, Suncor said past week.

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What will hurt, Salazar said, is nan Alberta government’s revenues, which are heavy limited connected earthy assets royalties.

In its second-quarter economical connection past month, nan Alberta authorities said it’s expecting WTI to mean US$61.50 successful nan 2025-26 fiscal year, little than nan US$68 it had predicted successful its February budget.

Over nan people of a year, nan provincial authorities estimates that each US$1 tube plaything successful nan WTI value has an effect of $750 cardinal connected its coffers.

Another facet moving successful favour of Canadian lipid companies is nan truth that nan value quality has been comparatively constrictive betwixt WTI and nan heavier, trickier-to-refine crude from nan oilsands, Western Canadian Select.

The Alberta authorities says nan WTI-WCS differential has averaged astir US$10-12 a tube successful caller months.

That’s acknowledgment successful ample portion to nan startup past twelvemonth of nan Trans Mountain pipeline description to nan Vancouver area, which has enabled nan first exports of Canadian crude to Asian markets successful meaningful amounts.

It’s a acold outcry from October 2018, erstwhile nan differential expanded to US$43 a barrel, pinch immoderate trading days seeing it turn to much than US$50 amid a deficiency of pipeline capacity. As a result, nan Alberta authorities announced it would enforce a headdress connected really overmuch lipid companies tin produce.

“We presently person a very patient (Western Canadian Select) differential,” Johnston said.