Oil prices have improved a great deal since the spring when a perfect storm of circumstances saw West Texas Intermediate (WTI) close at negative $37.63 per barrel on April 20. As of Tuesday, WTI closed at $38.94 for a turnaround of 203 per cent since the low point in April.

But headlines about oil prices “surging” mask the fact that WTI prices around $40 are still soft. Even with a smaller differential between WTI and Western Canadian Select, current prices are not enough to keep some companies in the black and are below where they need to be to spur capital investment and growth.

The rise in price has moved the industry from bleeding in the street into intensive care.

What’s more, current prices are resting on record-breaking voluntary supply cuts and market-driven production shut-ins. It’s estimated that up to a million barrels per day of Alberta’s production has been shut-in.

Oil demand will rise from its low point during the pandemic as economies reopen, but slow global growth and reduced travel could keep consumption from returning to pre-COVID levels for months, if not years.

At the same time, the OPEC+ supply cuts were only extended to the end of July and the improvement in prices might lead U.S. shale producers to start pumping again, irritating both Saudi Arabia and Russia. Fingers crossed it won’t happen, but these conditions could lead to another oil supply glut.

There are lots of reasons to believe that global oil demand will recover, the supply glut will abate and Alberta’s oil patch will make up the ground it has lost and start to grow again. But, for now, capital spending will be low. As a result, our economy won’t get back to pre-pandemic levels, let alone surpass them, until the oil patch is fully up and running again in terms of production, investment and stronger prices.