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Energy Summary for Aug. 24, 2020

2020-08-24 20:37 ET - Market Summary

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by Stockwatch Business Reporter

West Texas Intermediate crude for September delivery added 28 cents to $42.62 on the New York Merc, while Brent for October added 78 cents to $45.13 (all figures in this para U.S.). Western Canadian Select traded at a discount of $11.35 to WTI, unchanged. Natural gas for September added six cents to $2.51. The TSX energy index added 3.43 points to close at 83.32.

The COVID-19 pandemic and its unprecedented demand destruction could result in the permanent loss of more than one-10th of Canadian oil production, according to a dire new forecast from the Canadian Energy Research Institute (CERI). CERI's forecasts show that a prolonged global recession could permanently eliminate 600,000 barrels a day of current Canadian oil production, almost entirely from Alberta. For context, Canada's oil production in 2019 averaged 4.69 million barrels a day.

Two things are worth noting. First, eventually new projects would come on-line to replace the lost production, although CERI does not see this happening until after 2022. Second, all of the above falls under the worst-case scenario. Under the best-case scenario, CERI predicts that Canadian oil production will decline by just 300,000 barrels a day in 2020 but then recover by mid-2021. This is much closer to the view of the Canada Energy Regulator (CER), which predicted last week that Canadian oil production will average 4.38 million barrels a day this year, a 310,000-barrel-a-day drop from last year. That forecast included a gradual recovery in production from this month onward.

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