Deloitte recently issued its Q3 oil & gas price forecast and commentary.
Here some of the key points:
- Suppliers cut 12 million barrels per day (global oil production is normally about 80 million per day) because of the price war combined with the effects of the virus panic.
- After the severe demand shock from the virus panic, oil demand has started trending upward again. Producers are easing their curtailments.
- Increased government infrastructure spending in North America should help Canadian heavy crude producers (asphalt is typically used in road construction).
- Capital spending is being cut significantly to protect cash flow — the Canadian sector cut $13 billion from 2020 capital spending budgets.
- Weakened global trade and modified consumer behavior will likely affect oil demand for a while.
- Natural gas prices are higher due to ongoing trend of reduced production in Canada, but reduced industrial activity is an offsetting factor (the report estimates 25 percent of natural gas in Alberta consumed in “local” thermal operations).
- Tighter demands from creditors will put strain on the upstream sector.
- The midstream sector is typically stable but is exposed now to greater third-party risk (producing companies that will be unable to meet their commitments).
- The virus panic is creating a big headache for project execution.
Read the full report here.
