Crude Oil Costs
West Texas Intermediate (WTI), Canadian Gentle Candy (CLS), and Western Canadian Choose (WCS) crude oil prices decreased in 2016 by eleven, 7, and sixteen per cent, respectively, as continued excessive inventories placed downward strain on costs. Actual and forecast crude oil costs are proven in Table 1.1 [HTML].
– The Worldwide Energy Company (IEA) estimated that international crude oil demand would develop by 1.5 million barrels per day (106 bbl/d) in 2016. The IEA forecasts that it’ll decelerate in 2017 to 1.3 106 bbl/d.
– World crude oil supply was up zero.3 106 bbl/d in 2016 as record output by the Group of the Petroleum Exporting International locations (OPEC) greater than offset a zero.9 106 bbl/d decline by non-OPEC producers.
– Crude oil prices are forecast to slightly get well in 2017 with higher will increase thereafter based mostly on a projected discount of world inventories and a rebalancing of the oil market within the second half of this 12 months.
In 2016, the WTI worth averaged US$forty three.Forty per barrel (bbl), down from US$forty eight.79/bbl in 2015.Figure 1.1 [Tableau] shows historical and forecast WTI prices at Cushing, Oklahoma. The WTI base worth is forecast to be US$fifty three.00/bbl in 2017.
The low worth situation, with WTI at US$44.00/bbl, reflects the possibility that international crude oil inventories will not come into stability in 2017, notably if OPEC members and the non-OPEC members who also committed to do so do not lower production by mixed output of 1.8 106 bbl/d.
The excessive price scenario, with WTI at US$60.00/bbl, displays the likelihood that international crude oil inventories will decrease faster than forecast in the base value situation and that the decrease manufacturing goal shall be adhered to.
The WTI crude oil price is anticipated to gradually strengthen to US$83.26/bbl by 2026 in the bottom price state of affairs. Within the low and excessive value scenarios, WTI is forecast to succeed in US$67.00/bbl and US$109.08/bbl, respectively. The oil refinery cost low worth eventualities assumes robust international production development, whereas in the high value situation, new supply is predicted to be inadequate to offset declines in current manufacturing due to insufficient capital spending for brand spanking new growth.
As illustrated in Figure 1.2 [Tableau], in 2016, U.S. crude oil production is estimated to have decreased by 6 per cent to 8.9 106 bbl/d─1.41 million cubic metres per day (106 m3/d)─compared with 2015. Regardless that WTI prices began to fall in 2014, U.S. oil refinery cost production continued to grow up until 2015 as producers became more efficient and hedged towards low costs. As oil costs continued to fall in 2016, expensive and less efficient wells and people of small producers had been shut in, ultimately decreasing the production of oil. This has led to lower capital investment, which isn’t sustainable over the long term.
In 2016, CLS averaged Cdn$fifty three.95/bbl, 7 per cent lower than 2015 and down from Cdn$57.76/bbl in 2015. As illustrated in Determine 1.Three [Tableau], CLS is projected to rise to Cdn$64.01/bbl in 2017, mirroring the forecast enhance within the WTI value, and is predicted to continue to strengthen throughout the forecast period, averaging Cdn$ninety five.51/bbl by 2026, with a range of Cdn$77.39/bbl to Cdn$127.97/bbl.
How the CLS price is derived will be discovered in the methodology part.
In 2016, WCS averaged US$29.65/bbl, down 16 per cent from US$35.27/bbl in 2015. The differential between WCS and WTI averaged US$thirteen.50/bbl (32 per cent) in 2016 and is forecast to remain round this stage in 2017 earlier than widening over the forecast period resulting from inadequate pipeline capability. As illustrated in Determine 1.4 [Tableau], the WCS worth is projected to average US$38.Sixty nine/bbl in 2017 and increase for the remainder of the forecast interval, reaching US$sixty five.78/bbl in 2026.
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