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Updated June 2021

 

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Price Forecast Cases

Three cases for the prices are presented in this section:

  • The base-price case provides a reference point on assumptions about demand recovery post COVID-19 pandemic, and increase in supply as drilling activity improves.
  • The low-price case captures a slow recovery in oil demand.
  • The high-price case captures a faster-than-expected recovery in oil demand.

Highlights of 2020

WTI: West Texas Intermediate (WTI) price decreased by 31 per cent, averaging US$39.23 per barrel (bbl) in 2020. The sharp decrease was due to the sudden decline in demand and an unmatched adjustment in production, leading to the rapid increases of global oil inventories.

CLS: Canadian Light Sweet (CLS) crude oil price decreased by 33 per cent, averaging Cdn$45.77/bbl.  

WCS: The price of Western Canadian Select (WCS) decreased by 39 per cent, averaging US$26.81/bbl.

The WCS and CLS decreases mirrored the drop in WTI price, but they were also subject to wide fluctuations of price differentials to WTI.

Table 1.1 shows historical and forecast crude oil prices.

Highlights of 2021 to 2030

WTI and CLS: The forecast will depend on how COVID-19 uncertainties are addressed, and how oil consumption behavior changes. It will also depend on the duration of, and adherence to, production cuts targeted by Organization of the Petroleum Exporting Countries (OPEC) and its allied non-member countries (collectively referred to as OPEC+) and on how the U.S. shale industry responds to the recent relative strength in oil prices.

The price of WTI in 2021 will be impacted by OPEC+’s commitment to restrain supply and a stronger global economy. However, the recovery in global demand is likely to be uneven, given lengthening of COVID-19 pandemic, particularly in Europe and North America, underlying OPEC+’s role to balance supply with the slow recovery of demand.

In the absence of a larger shift to policies that reduce oil consumption, it is too early to foresee a rapid decline in oil demand negatively impacting prices. Meanwhile, with increased competition for producers to claim pipeline takeaway capacity, the differential between CLS and WTI is anticipated to gradually increase.

  • Under the base-price case, WTI is projected to stabilize to US$53.00/bbl in 2021, increase to US$54.00/bbl in 2022, and reach US$70.00/bbl by 2030, as global oil supply and demand progressively move towards balance.
  • The low-price case forecast for WTI is US$40.53/bbl in 2021, US$41.29/bbl in 2022, and an increase to US$53.52/bbl by 2030; the high-price case forecast is US$69.32/bbl in 2021, US$70.62/bbl in 2022, and $US91.55/bbl by 2030.
  • The base-price case for CLS follows similar trends as WTI. It is projected to strengthen throughout the forecast period, from Cdn$59.00/bbl in 2021, to Cdn$77.50/bbl by 2030.
  • The low-price case for CLS starts at Cdn$47.53/bbl in 2021, reaching Cdn$62.44/bbl by 2030; the high-price case increases from Cdn$73.23 in 2021 to Cdn$96.19/bbl in 2030.

WCS: Similar to other oil prices, WCS is expected to recover in 2021 and onwards. The increase in transportation capacity from pipeline optimization projects, additional pipeline capacity, and increased use of rail transportation is expected to counter the impact of the Keystone XL pipeline permit revocation.

  • Under the base-price case, WCS increases to US$40.00/bbl in 2021, US$41.00/bbl in 2022, and reaches US$55.00/bbl by 2030.
  • The low-price case forecasts WCS at US$26.27/bbl in 2021, increasing to US$36.12/bbl by 2030; the high-price cases forecasts WCS at US$60.92/bbl in 2021, increasing to US$83.76/bbl by 2030.

Price differentials: Relative to WTI, price differentials for CLS and WCS averaged US$5.08/bbl in 2020 (decreasing from US$5.73/bbl in 2019), and US$12.42/bbl (decreasing from US$12.74/bbl in 2019), respectively. Local market access issues, including pipeline limitations and refinery outages, continue to pose downward pressure to Alberta’s benchmark prices on top of global macroeconomic conditions. Figure 1.1 shows price differentials for CLS and WCS relative to WTI.