“While many European countries significantly increased their natural gas storage levels in anticipation of a harsh winter, milder weather has left them with higher-than-normal supplies,” says Andrew Botterill, national Oil, Gas & Chemicals leader at Deloitte Canada. “The North American market is also oversupplied right now, so until that changes, we’re not expecting a return to the elevated price levels we saw in 2022.”
Unlike natural gas, oil prices have stabilized in the first quarter of this year and are likely to remain stable throughout the spring according to Deloitte’s price forecast. However, a recent announcement by OPEC+ on April 2, may provide upward pressure that we will continue to monitor. This is due in part to increased demand from China, which has reopened its economy after several COVID-19 lockdowns, and steady production by OPEC countries. The Deloitte forecast notes that WCS (Western Canada Select) has seen significant price growth as the differential with WTI (West Texas Intermediate) has narrowed from more than US$30 per barrel in November 2022 to about US$15 per barrel in March 2023.
“There’s been an increased demand for Canadian oil, in part because releases from the US strategic reserve have ended and partly because declining natural gas prices have improved the economics of refining heavier crude,” says Botterill.
In a separate report on global merger and acquisition (M&A) activity in the oil and gas sector, Deloitte states M&A spending in the final quarter of 2022 was just $20 billion, about 40-per-cent lower than the five-year average for that quarter. With lower debt and record cash flows, sellers were in a better position to resist selling at the lower prices buyers were willing to pay.
The report predicts that natural gas supply and liquified natural gas assets will be the focus of industry transactions this year as countries try to mitigate energy security concerns and rising energy prices caused by geopolitical tension, including the war in Ukraine, and look for strategic investments in the cleaner energy space. Deloitte anticipates companies will be pushed to consolidate in the coming years to achieve operational excellence in decarbonization, increase automation and improve operational efficiencies.
For Deloitte’s complete oil and gas price forecast and its most recent oil and gas M&A report, visit our website.
Deloitte provides audit and assurance, consulting, financial advisory, risk advisory, tax, and related services to public and private clients spanning multiple industries. Deloitte serves four out of five Fortune Global 500® companies through a globally connected network of member firms in more than 150 countries and territories bringing world-class capabilities, insights, and service to address clients’ most complex business challenges. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Our global Purpose is making an impact that matters. At Deloitte Canada, that translates into building a better future by accelerating and expanding access to knowledge. We believe we can achieve this Purpose by living our shared values to lead the way, serve with integrity, take care of each other, foster inclusion, and collaborate for measurable impact.
To learn more about Deloitte’s approximately 330,000 professionals, over 11,000 of whom are part of the Canadian firm, please connect with us on LinkedIn, Twitter, Instagram, or Facebook.