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New forecasts predict falling oil prices

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Lower oil prices would benefit consumers, but would deprive Alberta of important royalties from oil and natural gas. (Archive photo)

  • Bassirou Bâ (View profile)Bassirou Bâ

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Many analysts expect a fall in world oil prices in 2024. This should continue until 2026, before rising slightly in the following years, without however exceeding the $80 per barrel mark, forecasts by example the firm Deloitte.

In its latest report (New window), Deloitte Canada expects to see the average benchmark price of crude in North America, West Texas Intermediate (WTI), to be at $72 next year. This would represent a decrease of 7% compared to the 2023 average, and 29% compared to 2022.

Deloitte highlights that global prices oil prices reached their lowest level in more than two years.

On Tuesday, the benchmark crude price stood around 72 $ per barrel.

The drop in prices is explained by the combination of the effects of several factors, including the decision of the Organization of the Petroleum Exporting Countries (OPEC+) to reduce market supplies of crude oil in 2022 and a slowdown in demand, as explained by Andrew Botterill, energy specialist at Deloitte Canada.

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In response to OPEC's decision, the United States increased its oil production by 9% in 2023.

Oil markets have been volatile in 2023, mainly due to increased geopolitical tensions. Unlike previous years, these tensions did not lead to a rise in prices as normally happens.

A quote from Andrew Botterill, Deloitte Canada

OPEC also recently decided to cut its oil production by 2.2 million barrels per day during the first quarter of 2024.

Sara Vakhshouri, founder and president of energy consulting firm SVB Energy International, predicts the price of WTI would be in the $70 to $80 range this year .

ATB Financial forecasters expect the price of black gold to be around $75 per barrel. It will be weaker [than last year], but I don't think it will necessarily be much weaker, estimates Amir Arif, its general director for institutional research.

According to Mr. Arif, “oil demand will continue to grow at a slower pace in 2024 compared to 2023 and 2022.”

The U.S. Energy Information Administration forecasts that demand would increase this year by about 1 million barrels per day.

A drop in oil prices would relieve consumers' wallets, says Andrew Botterill, especially since the rise in energy prices, and gasoline in particular, has been one of the main catalysts for the increase in inflation.

C& #x27;is good news. We are all consumers, in one way or another. Lower prices will help us heat our homes and fill [the gas tanks of] our vehicles.

A quote from Andrew Botterill, Deloitte Canada

He said natural gas prices also remain weak, with the average annual price of Canada's benchmark AECO index expected to be $2.35, significantly below the average of $5.75 in 2022.

Deloitte also notes that if oil prices are not as promising as they a year or two, as new business opportunities have emerged in sectors such as petrochemicals.

The report cites in this regard the project of the American chemical manufacturer Dow, in Fort Saskatchewan, near Edmonton.

The drop in energy prices would, however, be seen as a cold shower for the Alberta government, which remains largely dependent on royalties from oil and natural gas.

< p class="StyledBodyHtmlParagraph-sc-48221190-4 hnvfyV">The province recently anticipated an increase of $3.2 billion in budget surplus, thanks in particular to the oil windfall.

The coffers of the&#x27 Alberta could suffer even more from a drop in prices since a $1 change in the price of oil results in an increase or decrease in revenue of $630 million, the province explained in its latest budget.

The same document projects a barrel price of $79. If these forecasts remain at this level, this year's change could amount to more than $4 billion.

The price of WTI is one of several factors affecting Alberta's revenue outlook, says a spokesperson for the finance minister's office.

We know that oil prices will continue to be volatile. The government's WTI price forecast will remain conservative and reflect the best available information on global oil fundamentals and geopolitical risks known at the time.

A quote from Alberta Ministry of Finance

Revenues from non-renewable resources, which often represent between a quarter and a third of Alberta's total revenues, are expected to be around $19.7 billion for 2023-2024.

The industry will also not take kindly to these new forecasts, some of which have reaped record profits in 2022 thanks to the surge in prices of raw materials.

With information from CBC News and The Canadian Press

  • Bassirou Bâ (View profile)Bassirou BâSuivre

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