Oil prices could hit $67 per barrel by 2020, according to a report this week by the Conference Board of Canada, but the commodity “isn’t going to rebound as quickly as had been predicted thanks to ramped-up worldwide production, lower demand, and stockpiled supplies,” CBC reports.
“Canadian oil producers continue to be challenged by the extended battle for market share that has kept global crude prices stubbornly low,” said Conference Board economist Carlos A. Murillo. “For the first time in recorded history, the oil industry is expected to post not only the largest level of losses but also back-to-back consecutive losses”—$11 billion in pre-tax losses in 2015, and $10 billion in 2016.
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Canadian Press reports that the Conference Board’s predicted recovery by 2020 depends on the fossil industry cutting costs and boosting productivity.
“They really need to change their mindset and operating way going forward for them to be more successful in a lower price environment,” Murillo said. “They can control their own wages, that’s one of the things that I think are a lesson learned for them. And they can be more efficient with how they use materials and all the inputs they need for producing oil.”
As far back as February 2015, Canadian Natural Resources Ltd. President Steve Laut was warning the Fort McMurray Chamber of Commerce the industry faced a “death spiral” unless it could get a break on the “made in Fort McMurray cost” of doing business.
This week, the Conference Board concluded that Canada’s fossil industry has been unprofitable since the last quarter of 2014. “One hundred per cent of the companies’ balance sheets have been very severely impacted,” said Ernst & Young consultant Barry Munro. “The decision to deploy capital, I think people are just going to be a lot more prudent and cautious.”
Meanwhile, global financial services firm Deloitte, which had previously expected oil prices to touch $60 per barrel in 2017, now foresees an average of $51 through the end of next year.
“The optimism we saw earlier this year that the market would achieve a supply-and-demand balance has weakened over the past three months,” said Andrew Botterill, a partner in the firm’s resource evaluation and advisory group. “It may not be the quick build that we might hope for. So, that’s why people are expecting it to be…low a little bit longer—but maybe with a little bit more stability than we’ve seen in the last 18 months.”