oil-gas-natural

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.

Read:

Expect sell-offs in 2016

Batten down the hatches for 2016

Time to buy beaten-up base metals

Originally published on Advisor.ca

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