Global oil markets are once again entering choppy waters. After nearly two years of price support through production restraint, OPEC+ is now adding barrels back into the system. In August alone, the cartel is expected to increase output by 548,000 barrels per day (bpd) - the largest hike so far this year. While aimed at preserving market share, this influx comes at a time when global demand is softening, inflation remains sticky, and even with the recent US-EU 15% tariff deal, broader trade tensions and geopolitical risk continues to cloud the way ahead. Oil prices have been hovering around US$65/bbl (West Texas Intermediate) recently, down from US$75/bbl in mid June.

In the face of these headwinds, Canada’s oil sands producers appear well-positioned from a cost standpoint. After more than a decade of adaptation, technological upgrades, and capital discipline, the sector now boasts some of the lowest cost structures in North America. According to S&P Global, estimates on the half-cycle break-even prices (the cost to continue producing from existing assets and cover only operating expenses) for Canadian oil sands now range from as low as US$18 per barrel to around US$45 per barrel. On a full-cycle basis (includes all costs - from initial investment to ongoing maintenance and shareholder returns), a recent Reuters analysis of company data estimated that the West Texas Intermediate (WTI) prices needed for the five largest Canadian producers to break-even is between US$40.85 and US$43.10, well below the US$65 full-cycle average estimated for U.S. shale drillers.

This is a sharp reversal from the not-so-distant past. Throughout much of the 2010s, the oil sands were regarded as one of the more expensive sources of crude. The high start-up costs of these capital-intensive operations led to higher break-even prices.

Unlike shale, oil sands are long-lived. While production declines at a fast rate for shale wells, oil sands production can continue for decades once the project is built with minimal depletion. Canadian Natural Resources’ oil sands mining and upgrading assets, for instance, still hold 43 years of reserve life.

The past decade has seen Canadian operators achieve major cost efficiencies. From Imperial’s use of autonomous haul trucks and AI inspection robots to Suncor’s improved water management and plant reliability programs, a wave of incremental innovations has translated into material cost savings. One example is Suncor, who was able to shave US$7 per barrel off its breakeven cost in 2024. Beyond operational efficiencies, companies have also aggressively deleverged: since 2021, Canada’s five largest oil sands producers have collectively reduced net debt by over C$22 billion, allowing for more financial flexibility and improving per-barrel economics.

At the same time, production continues to rise, aiding export growth in Alberta and Canada. S&P projects that oil sands output will hit a new record of roughly 3.5 million bpd this year, with capacity expected to grow to 3.9 million bpd by 2030. This rise in production will also be supported by new infrastructure (e.g., Trans Mountain Expansion (TMX) project) that has allowed producers to increase oil exports to new markets.

Bottom line:  while 2025 presents real challenges, a decade of adaptation, innovation, and financial discipline, has left Canadian producers better equipped - and more resilient - to navigate today’s headwinds.

Answer to the previous trivia question: Two of Canada’s current 13 provincial/territorial premiers are women (Susan Holt of NB and Danielle Smith of AB).

Today’s trivia question: Who are the two Canadians who have been awarded the Nobel Prize for their work in the economic sciences?