Updated June 2020
Within this section
Price Forecast Cases
Given the unprecedented events in energy markets in early 2020, additional emphasis has been placed on lower oil prices in this year's report and their effects on other commodities and capital expenditures. For each of the oil prices within this section, there are three price cases with differing assumptions (further factors and details can be found within each price section):
- The base-price case is intended to provide a reference point to reflect assumptions involving a strong recovery and drawdown of inventories through the second-half of 2020;
- The low-price case considers a prolonged decrease in oil demand leading to a sustained supply surplus through 2020;
- The high-price case captures faster-than-expected effects of under investment and shut-in production, resulting in a significant decline of supply over 2020.
Highlights of 2019
WTI: Price of the West Texas Intermediate (WTI) decreased by 12 per cent, averaging US$57.01 per barrel (bbl). Despite production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and geopolitical tensions leading to short-term risk premiums on prices, persistent growth from the U.S. shale producers and global economic growth concerns weighed on prices.
CLS: Canadian Light Sweet (CLS) crude oil price increased by 3 per cent to average Cdn$67.71/bbl. The CLS price strengthened in response to Alberta's curtailment program.
WCS: The price of Western Canadian Select (WCS) increased by 15 per cent to US$44.28/bbl, largely due to production curtailments limiting oil sands producers' output and the return of U.S. refineries in key Alberta's bitumen export markets.
Table 1.1 shows the average crude oil prices for the years 2018 and 2019 and the prices expected over the forecast period.
Highlights of 2020 to 2029
WTI and CLS: Oil prices faced two significant disruptions early into 2020. OPEC supply management disputes in early March were the first major factor to pressure prices. Secondly, global oil demand faced unprecedented decreases resulting from responses to the coronavirus disease 2019 (COVID-19) pandemic. Beyond 2020, North American light oil price benchmarks are expected to steadily improve over the forecast as economic activity resumes and markets balance.
- Under the base-price case, WTI is projected to increase from an average price of US$35.00/bbl in 2020 to US$51.25/bbl in 2021, and reach US$68.92/bbl by 2029 as global supply and demand balance.
- The low-price case for WTI forecasts US$28.00/bbl in 2020, increasing to US$41.00/bbl in 2021, and US$51.69/bbl by 2029.
- The base-price of CLS, which follows similar trends as WTI, is projected to strengthen throughout the forecast period from Cdn$38.89/bbl in 2020 to Cdn$81.15/bbl by 2029.
- The low-price case for CLS increases from Cdn$31.11/bbl in 2020 to Cdn$60.86/bbl in 2029.
WCS: Along with the factors affecting lighter oil prices, the price for WCS is also expected to worsen in 2020 and will continue to remain subject to storage and transportation availability, as well as Alberta's curtailment policies (extended to December 2020); all of which affect the differentials with WTI prices. With the completion of pipeline optimizations, addition of at least one major pipeline, and sufficient rail capacity alleviating takeaway imbalances over the longer term, the price of WCS is projected to increase over the forecast period:
- Under the base-price case, WCS increases from US$19.00/bbl in 2020 to US$33.25/bbl in 2021, reaching US$55.92/bbl by 2029.
- The low-price case forecasts an average price of US$15.20/bbl in 2020, increasing to US$26.60/bbl in 2021, and US$41.94/bbl in 2029.
Price differentials: After multiple challenges to Alberta's exported products at the end of 2018 and ensuing supply management programs implemented by the Alberta government, price differentials between the CLS and WTI and the WCS and WTI narrowed in 2019, averaging US$5.99/bbl and US$12.74/bbl respectively. Although the curtailment program has alleviated some volatility, market access issues, such as pipeline and refinery outages, continue to pose acute risks to Alberta's benchmark prices beyond global economic conditions.