Price stabilization expected as global energy oversupply consumed
Increased M&A activity to reshape business internationally
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CALGARY, ALBERTA (April 5, 2016) – Deloitte’s Resource Evaluation and Advisory (REA) group is cautiously optimistic that the energy industry is moving into a recovery phase, though a lower oil price environment is expected to remain throughout 2016. The slowing of drilling and oil production in past months positions the global market to consume oil and gas oversupply and gradually shrink the current surplus. As such, the REA group predicts decreased market volatility and a shallow upward slope in prices.
“The coming months will see a continued struggle for recovery, with new developments in terms of both exports to untapped markets and business transactions,” says Andrew Botterill, Partner, REA group. “Increased merger and acquisition activity driven by this relative stability will alter the global industry, and its key players, moving forward.”
The December 2015 repeal of the U.S. crude oil export ban will further transform the market, Botterill says. The immediate equalization of Brent and WTI to near zero reflects the assumption that producers will shift their volumes to international markets.
Since the ban was lifted, major oil companies and independent traders alike have begun to test the appetite for U.S. oil in foreign markets. This has the potential to offer companies another market for their oil and may relieve some pressure on the U.S. crude stockpiles, which are currently at all-time highs.
The price forecast for all oil reference prices remains consistent with the Q4 2015 forecast, with an expected average price of $44/bbl USD for WTI, $54/bbl CAD for Edmonton Light, and $46/bbl USD for Brent.
Gas prices have decreased considerably since the end of 2015, with NYMEX and AECO prices dropping by 15 and 40 percent respectively from December 2015 to March 2016 (average price). The REA group is expecting $2.10/Mcf USD for NYMEX, $1.75/Mcf CAD for AECO, and $1.25/Mcf CAD for Station 2.
For Deloitte’s complete oil and gas price forecast dated March 31, 2016, visit our website.
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