CALGARY – Western Canadian producers are moving to restore some oil production as crude prices rise with demand thanks to the gradual opening of the world economy and OPEC and Russian output cuts.
But analysts say oil companies hit hard by low oil prices so far this year are being cautious and will choke back oil output again if higher prices prove unstable.
Analyst Phil Skolnick of Eight Capital says he’s seeing anecdotal evidence that some of the 875,000 barrels a day of curtailed volumes in Canada are coming back on line as benchmark U.S. oil prices rise above US$33 per barrel, up from less than US$13 a month ago.
Prices remain about 45 per cent lower than they were five months ago, however, which means individual operators are making project-by-project decisions as the profitability of their particular operations remain razor thin.
Oil’s recent rebound is being linked to signs that demand is growing in key markets such as China and North America as lockdowns imposed to deal with the COVID-19 pandemic are gradually lifted.
Analyst Matt Murphy of Tudor Pickering Holt & Co. says he is seeing greater than expected refinery utilization rates in Canada as fuel demand is lifted by more drivers taking to the roads.