Canada's oil producers still on shaky ground
The Conference Board of Canada (CBoC) warns the country's oil producers will likely face another rough year, although nowhere near as bad as last year.
The industry as a whole is expected to lose $1.1 billion in 2017, down from a total loss of $8.6 billion last year. Canada's oil producers are not expected to return to positive cash flow until the fourth quarter. Capital expenditures will likely total $22 billion this year, a mere fraction of the $62 billion spent in 2014.
The CBoC is forecasting oil markets will rebalance later this year. Fortunately, production growth should outpace demand over the next five years. Global demand is expected to rise 2 million bbl/day over the next two years, more than offsetting production gains of 1.3 million bbl/day annually.
After contracting about 10% per year over the past few years, revenues should finally start to grow 20% annually over the next 5 years.
Looking on the bright side, the CBoC remains cautiously optimistic about recent pipeline approvals. Construction of the TransMountain Expansion, Line 3 Replacement and perhaps Keystone XL will double the country's export capacity, inject over $30 billion into the economy and narrow price discounts for Canadian heavy oil.
The CBoC expects West Texas Intermediate (WTI) oil prices to average US$55 a barrel this year, rising to US$70 by 2021.