According to the most recent forecast from financial advisory firm Deloitte,oil costs ought to average around $55 US a barrel in 2017 for West Texas Intermediate, which ought to be sufficient for some thinned down Alberta producers to work beneficially.
“It’s significantly better than what the average was through last year, which is bringing some optimism into the sector,” said Andrew Botterill with Deloitte’s resource evaluation and advisory group.
“Obviously, it isn’t at a level that’s going to allow all producers to produce all of their inventory,” Botterill added.
“But it certainly is better than we’ve seen for some time. And with reductions in operating costs that companies have realized in the last year or two, there are more plays that are going to be economic.”
According to Deloitte’s outlook, the OPEC consent to limit production is one variable affecting everything, except that single-handedly isn’t probably going to build costs generously at any point in the near future.
“It’s going to take some time for people to really see how many barrels are going to leave the system with the OPEC cuts,” Botterill said.
“And, of course, there is still a little bit of a concern on whether that’s going to get through all of the oversupply that’s in the system.”
Botterill said, natural gas costs were poor in first 50% of 2016 however strengthened in the last 50% of the year. Late cold climate recommends they may remain solid into early 2017.
Still, he noticed, the cost of bringing on more natural gas production in both Canada and the U.S. remains “quite cheap,”so a sudden and supported value spike is improbable.
“It’s tough to see how we’re going to get very high, elevated prices,” he said.
Deloitte anticipates that Henry Hub costs will average around $3.25 per thousand cubic feet in 2017, which Botterill said is “significantly stronger” than a year back.
Overall, he said, the outlook for the oil and gas sector is improving.
“There’s a lot of opportunity in the sector now, and there’s some optimism in producers, and I think we’re going to see a much better 2017 than … last year.”