Oversupply of oil and gas is still a problem for markets. Also, due to the government’s renewed focus on clean energy and climate change, the energy industry is expected to face a year of uncertainty.

Experts thought the oversupply of oil globally, and of natural gas in North America, would have ended by now, says Andrew Botterill, partner at Resource Evaluation & Advisory group (REA). “We’ve been talking about lower oil prices for the better part of the year, but with a warm winter looming, natural gas storage has reached a five-year high. [That’s] going to further depress gas prices.”

Read: Bulls, bears and contango: what’s in store for crude

But there’s good news: REA’s Q4 forecast suggests that steering away from coal electricity generation in Alberta, as the government has promised, could have a positive impact on natural gas in the future—once new infrastructure is in place.

In the near-term, however, REA forecasts a Henry Hub 2016 gas price of US$2.40/Mcf, which matches up with futures expectations over the last month. REA also predicts an AECO forecast for 2016 of CAD$2.45/Mcf.

Read: 10 challenges for mining companies in 2016

REA’s Q4 forecast also takes a long-term view of the industry, forecasting the oil price to average below US$50 per barrel in 2016 and 2017, before starting a slow rise to US$80 per barrel by 2022. The Edmonton Light price forecast anticipates an average 2016 price of CAD$51 per barrel, but maintains that a low exchange rate is propping up Canadian oil prices.

Through 2016, says REA’s forecast, demand for oil will likely drop, which is in line with the International Energy Agency’s expectations.


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Originally published on Advisor.ca

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