Get ready for more volatility on the oil markets.
That’s the word from Deloitte’s latest price forecast which calls for WTI Crude to stay around US$48 per barrel for the rest of the year, despite more ups and downs.
Deloitte’s Andrew Botterill said companies needed to get their house in order during the downturn and made a lot of changes. Now there are a lot of producers trying to drill.
“They’re trying to create value in their companies and that’s creating some competition and a little bit of a tough balance of people going out and drilling and at the same time a little bit lower demand out there,” he said, adding the extra competition will heighten volatility.
This comes despite the OPEC cuts and Botterill explained at the end of the day, the U.S. will always put more supply into the market than Canada by virtue of it’s size.
“We’re in direct competition with the United States and they’re out there drilling their very best plays,” he said. “When there’s opportunities like this and a little bit of stability companies are going out and drilling their very best.”
There are some plays in Canada which are attracting investment but Botterill believes companies that can’t handle the volatility will likely be more cautious.
The early year stability also lead to more mergers and acquisitions.
“There’s a lot of transformation that’s going to go on in the sector in consolidation and more companies trying to manage their costs through scale, so I think the M&A sector is still going to be quite robust for the last half of the year,” he said.
But after the ups and downs of the last six weeks, expect companies to be more cautious in everything they do.
Either way, for now at least, more drilling means more jobs.
