REPORT: Futures show long-term oil price declining and gas price remaining flat

CALGARY, ALBERTA (January 3, 2014) – Deloitte’s Resource Evaluation & Advisory group released its current Canadian domestic oil and gas price forecast today, along with a stern word of caution for investors. Deloitte’s analysis of the trends in futures pricing since 2010 gives a strong indication that oil is on its way down, and that natural gas prices will remain flat as far out as 2021 and 2022.

In the commentary accompanying Deloitte’s December 31, 2013 forecast, Andrew Botterill, Senior Manager, Resource Evaluation & Advisory, tracks the futures trends for Henry Hub Gas, AECO Gas and WTI Oil from March 2010 through December 2013.

“The trends suggest that the long-term futures market for gas is predicting continued over-supply in North America,” Mr. Botterill comments. “The other interesting trend is the ever-decreasing value of natural gas during the last year of each dataset. The December 2013 futures price for natural gas is $6.04/Mcf. That’s a far cry from the $8.50/Mcf futures price listed three years ago.”

With respect to WTI Oil, Mr. Botterill notes the key observation is that, regardless of the starting price at the time, the long-term futures price has been in a downward trend since March 2011.

“The moral of the story,” says Mr. Botterill, “is that energy companies and investors need to plan with caution and factor in the long-term implications of their decisions. What you see today, you may not be able to realize tomorrow.”

Deloitte’s December 31, 2013 forecast shows WTI oil at US$95.00/bbl for 2014, decreasing to US$90/bbl for 2015 and eventually leveling out at US$