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Oil prices warming up

Oil prices warming up

Posted on: 4/4/2018 | Author: ATB Financial's Economics + Research Team

​With temperatures still below zero and plenty of snow on the ground, it may feel like it's not heating up, right? The good news is that it is, at least when it comes to oil prices.

The price of North America's benchmark price for oil (West Texas Intermediate) currently sits around $US 65 per barrel, that’s 25 per cent higher than during the same time last year. The last time oil prices were this high was back at the beginning of 2014 when Alberta’s economy was growing at a rate of nearly five per cent.

Throughout 2015-2017, prices were stuck around $US 50 per barrel (WTI). Higher US production levels were a significant factor in this--but it is changing. Supply levels are on the decline and global demand for crude oil is intensifying and causing prices to push higher.

There is more good news, too.

At the start of 2018, the Canadian benchmark price for oil, Western Canadian Select (WCS) (the price Alberta producers receive) had not improved at all from last year. Canadian pricing was thought to be held back by pipeline bottlenecks. However, over the first three months of the year, this changed. Compared to January, WCS prices are now 13 per cent higher and currently sit around $US 44. The price improvement from the beginning of the year is due to higher demand for cheaper WCS blend. Prices have also improved on the back of the latest victory regarding the Trans Mountain pipeline expansion project.

Higher oil prices are good news for Alberta for several reasons. Improved energy prices will help provide expansions to capital spending programs in the province. They will also alleviate some of the problems Alberta’s labour market is still encountering from the 2015-16 downturn. When it comes to oil prices, the forecast at this point looks warmer.

Oil prices, graph

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