41074689•01/31/13


Global economic uncertainty to affect price of crude in 2013.


STACEY LEE


According to the National Energy Board, the price of Canadian crude in 2013 will, as always, be determined by demand, however, the global market remains plagued by “issues.”


NEB oil market analyst Christian Rankin says 2012 was characterized by ongoing geopolitical risks related to supply and demand as well as concerns linked to the health of the global economy - problems which may continue to stunt oil prices throughout 2013.


“Those key factors contributed to varying expectations regarding the direction that oil markets would take in 2012,” says Rankin. “In the end oil prices were relatively stable throughout the year. West Texas Intermediate (WTI) averaged US $94 per barrel while Brent averaged US $112 per barrel.”


Supply and demand imbalances forecast by the NEB in its 2012 Winter Outlook were realized as were logistical problems. Now, just weeks into the first quarter of 2013, everyone looks on as the price per barrel sways slightly and the cost of regular gasoline has dropped below $1 per litre in many communities for the first time in months.


Like the 2012 Winter Outlook, the NEB forecasts a WTI average of between US $85 and US $95 per barrel.


“The Brent would average between US $110 and US $120 per barrel throughout the first quarter,” Rankin says. “As in 2012 it is expected that ongoing geopolitical risks to supply and economic uncertainty will continue to influence oil prices in 2013.”


Rankin also says increasing non-OPEC (Organization of Petroleum Exporting Companies) supply and greater OPEC production capacity could be tempering factors.


According to the Review of Issues Affecting the Price of Crude Oil, prepared by Natural Resources Canada, the crude oil industry remains integral to the nations economic future. World oil prices reached a climax in July 2008 when Canadian crude sold for $147 per barrel in July, but then fell dramatically to just $30 per barrel by December.


The NRC’s investigation of the incredible fluctuation revealed severe weather events, OPEC production decisions, crude oil inventory levels and institutional investment to be among the prevalent factors which will continue to affect oil prices in the future.


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TD Financial Group economist Leslie Preston told Pipeline in early 2012 low oil prices have a negligible impact on the Canadian economy.


“The Bank of Canada has done an analysis on the Canadian economy, as a whole, to try and disentangle whether or not high oil prices are a positive or negative for the economy,” she said. “They have determined (low prices) are a very slight negative.”


Higher prices do have a negative impact on the economy in that the consumer must pay higher prices at the pumps, the value of the Canadian dollar increases and slows non-oil exports.


The National Energy Boards Winter Outlook is available online at www.neb-one.gc.ca.


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