Newspaper article The Canadian Press

Oil Price Rise Insufficient to Boost Canadian Oilpatch Spending, Analysts Agree

Newspaper article The Canadian Press

Oil Price Rise Insufficient to Boost Canadian Oilpatch Spending, Analysts Agree

Article excerpt

Oil price surge won't spur spending: analysts

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CALGARY - A recent surge in oil prices will boost the bottom line of Canadian oil and gas producers but remains well below the minimum level needed to encourage increased investments in the oilsands or conventional oil and gas, energy analysts say.

U.S. benchmark West Texas Intermediate crude prices recovered Wednesday to US$52.14 per barrel after sliding Tuesday but stopped short of the five-month-high close of US$52.22 per barrel on Monday, which was up more than 20 per cent from lows in June.

"Fifty-dollar WTI is not high enough to support a material uptick in oilsands investments," said Randy Ollenberger, managing director of oil and gas equity research for BMO Capital Markets.

"Sustained US$60-plus oil prices are required to support most projects."

BMO links the recent run-up in crude oil prices to lower-than-expected U.S. oil production growth in the first half of 2017 but says it expects second half growth will be back on track.

That means New York-traded West Texas Intermediate prices will remain "range-bound" between US$45 and US$55 per barrel, the bank concludes.

In a report Wednesday, GMP FirstEnergy Capital affirmed its forecast for average WTI oil prices to rise to about US$56 per barrel in 2018 from US$50 this year, and to jump to the mid-US$60s per barrel by 2020.

It says that normally those prices would lead to an increase in spending on Canadian exploration and production, but producers have been reluctant to make the commitment because the market has been so volatile. It says it's assuming most capital spending programs will grow by less than 10 per cent next year.

Judith Dwarkin, chief economist at RS Energy Group, said she agrees companies will be reluctant to increase spending in budgets that will be finalized over the next few months. …

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