Bank of Canada warns bickering over pipelines will "discourage" long-term investments in the oil sands
In its spring Monetary Policy Report, the Bank of Canada (BoC) says it remains cautiously optimistic on oil prices, noting it expects prices to hold roughly at the current levels over the next few years.
The Bank says global inventories have started to decline, thanks to OPEC's production cap and robust global demand. A rapid rise in crude production out of US shale should keep energy markets "roughly balanced."
The BoC has left their Brent and West Texas Intermediate (WTI) price forecasts unchanged at US$65 and US$60, respectively, while expectations for Western Canadian Select (WCS) have been revised higher by US$5 to $40 a barrel.
The Bank warns that the WCS discount to WTI remains wide due to limited pipeline and rail capacity out of Western Canada, which will discourage long term investments in the oil sands. The country's energy sector accounts for about 20% of business investment nationally. The BoC also warns that regulatory uncertainty and a more business-friendly US Administration has reduced the competitiveness of Canada's oil patch.
The Bank now says real GDP growth should average 2.0% and 2.1% this year and next, revised from a previous forecast of 2.2% and 1.6%, respectively. GDP growth is expected to slow to 1.8% in 2020.