Press releases

Oil and gas markets set to rebound in 2021

Vaccines should allow economies to reopen and boost global demand

Calgary, January 6, 2021 – Recent positive news about the availability of several vaccines against COVID-19 and optimism the world could return to pre-pandemic consumption behaviours are expected to bolster the oil and gas market in 2021, according to the latest forecast from Deloitte’s Resource Evaluation and Advisory (REA) group. While overall global supply is down from levels one year ago, industry forecasts show demand will begin to exceed supply in 2021, which Deloitte believes will lead to continued sector recovery throughout the year.

“A return to higher demand for crude oil is great news for the sector after a very challenging year where production was curtailed and storage levels increased, pushing down prices from what had been expected at the start of the year,” says Andrew Botterill, national Oil & Gas leader at Deloitte Canada. “Although crude oil markets are likely to remain relatively flat in the near term, we started seeing prices increase somewhat toward the end of 2020 and expect that to continue as economies begin to reopen and recover from the effects of the pandemic.”

The report notes the price differential between WTI and Western Canadian Select was much narrower in 2020 than the historical average due to stable demand from refineries in the United States for Canadian heavy oil. Deloitte expects that differential to widen within the next five years to about US$15 per barrel, however, reflecting the additional costs of shipping excess volumes by rail. The average differential for Canadian Light, which remained similar in 2020 to the average in 2019, is forecast to return to the five-year average of -US$5 per barrel.

In contrast to oil markets, prices for natural gas rose in 2020, with AECO prices at their strongest in years, up 25 percent year over year as Canadian producers increased shipments to the United States and eastern Canadian markets and accessed storage in summer months. These higher AECO prices have accelerated winter drilling schedules and increased production volumes above those of one year ago. Canadian natural gas storage levels are currently above the five-year average, but Deloitte expects them to decrease in the first quarter of 2021 due to higher residential demand during a cold winter. 

“AECO prices have benefited from a reduction in natural gas production in the United States over the past year, but we expect the differential with Henry Hub prices will widen over the next few years with increased Canadian production and stabilized development in the US,” says Botterill. “Nevertheless, we continue to be optimistic about the future of natural gas.”

Botterill says a recent report from the Canadian Energy Regulator (CER) outlining its future energy supply and consumption forecast reinforces the need for energy producers to undertake scenario planning to understand how markets could change and what they need to do to stay competitive. This is particularly important as producers grapple with decarbonization, an area where Deloitte believes Canadian energy companies should embrace opportunities for investment and partnerships to become bold players in helping to develop a clean, green economy.

“Energy transition is going to take years if not decades to complete but planning and investments by producers have to be happening now,” says Botterill. “We believe oil and gas producers should be engaging with their stakeholders to help them make the right choices to stay successful and to build trust with their investors, with regulators and with the public.”

For Deloitte’s complete oil and gas price forecast dated December 31, 2020, which includes an explanation of how new guidance from the Canadian Oil and Gas Evaluation Handbook is likely to affect future price forecasts, visit our website.

About Deloitte
Deloitte provides audit and assurance, consulting, financial advisory, risk advisory, tax, and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries and territories bringing world-class capabilities, insights, and service to address clients’ most complex business challenges. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Our global Purpose is making an impact that matters. At Deloitte Canada, that translates into building a better future by accelerating and expanding access to knowledge. We believe we can achieve this Purpose by living our shared values to lead the way, serve with integrity, take care of each other, foster inclusion, and collaborate for measurable impact. 

To learn more about Deloitte’s approximately 312,000 professionals, over 12,000 of whom are part of the Canadian firm, please connect with us on LinkedIn, Twitter, Instagram, or Facebook.

Did you find this useful?