For a good number of Canadians, especially in Alberta, checking on where oil and natural gas prices are at sets the tone for their work day.

It can be an anxiety-inducing exercise because of the volatile nature of these prices and the mind-boggling number of reasons they might move up or down—from bad weather (or good weather) to how a Saudi prince is feeling that day to storage levels to Chinese GDP numbers.

Added to this is the need to know where prices are going rather than where they have been.

With this in mind, it’s useful to step back now and then from the daily numbers and the detailed explanations of what might be affecting them to look at the longer-term trends and where they might be headed.

Starting with oil prices, the trend this year has been down. The West Texas Intermediate (WTI) benchmark that Alberta prices tend to track, is 16% lower on a year-to-date (YTD) basis through November compared to the same period in 2024. The Western Canada Select (WCS) benchmark* is down by a similar proportion (-15%), which would be worse if the differential between the two benchmarks was not also down. The smaller differential is linked to the increase in egress capacity via the Trans Mountain expansion and the option to export more oil to countries other than the United States.

The drop in prices is good news if you are a consumer, but troubling if you are connected to the oil patch as a producer, investor, or worker (not to mention as citizens via lower royalties for governments). With that said, prices have not plummeted to levels that would trigger a major slowdown in the sector and, as has happened more than a few times in Alberta, a provincial economic downturn.

*WCS is a heavy oil blend produced exclusively in western Canada.  

In terms of what’s next for oil prices, there are, as noted, a lot of potential variables in play. But, the basic picture is one in which there is lots of oil out there (OPEC is still holding back some of its supply). And, while demand is expected to keep rising on an annual basis, tariffs and tariff-related uncertainty will keep the increase modest. Putting these two overarching factors together, the outlook is for somewhat softer benchmark prices in 2026. Our forecast is for WTI to average US$62 next year and WCS US$48.

The most significant wildcard here is, as usual, geopolitics with things like sanctions on Russian or Venezuelan oil and military conflict in the Middle East potentially causing prices to spike.

Turning to natural gas, weak prices have started to trend upward. After dismally low prices in 2024, the Alberta price benchmark (AECO), while still soft, is up by 54% YTD. Prices this November were a solid 72% higher than in November 2024.   

The gamechanger on this front is LNG exports from both the newly operational LNG Canada facility on the B.C. coast and U.S. export facilities (more on this tomorrow). These LNG exports have started to drain off some of the ample North American natural gas supply, supporting stronger prices despite high storage levels.

We anticipate the LNG-export effect to continue to support stronger prices with our revised forecast for AECO at around US$2 (C$2.8) for 2026, up from US$1.4 (C$2) this year. With gas-fired electricity demand also expected to increase over time as more AI data centres are constructed, this will provide additional price support in the years ahead.  

Answer to the previous trivia question: Soleil, a Belgian Sheepdog, won Best in Show at the Kennel Club of Philadelphia’s 2025 National Dog Show.

Today’s trivia question: Where is the world’s largest LNG export facility located?