Canadian Oil and Gas Supply Special Report
Overflowing Oil Supply to Reshape Energy Sector; Real Estate Faces Local Effects, But Some Benefits Will Emerge
Oil demand tumbles under quarantine, sending prices to fresh lows. The global health crisis has idled factories and stalled business, leading to a historic fall in oil consumption at a time when production was at an all-time high. As lockdown measures have set in, the flow of goods has slowed substantially and motorists and airplanes have been unable to travel, cutting fuel demand drastically. Global demand for oil is estimated to fall by one-third during the pandemic, equating to 30 million barrels a day. The nation’s producers have been slow to shut wells and stop pumping, while cuts made by OPEC were too little and too late to keep prices afloat. Demand has contracted much faster than supply, leaving storage near capacity and driving prices to record lows. Western Canada Select has traded near $5 per barrel since the end of March, down from more than $55 a barrel one year ago, marking a stark shift for the energy industry that will reshape markets. The impact of the oil shock will ripple across to other segments of the economy and could extend beyond the oil-rich province of Alberta. Lower prices typically trigger savings for Canadian consumers and fuel-burning businesses, though as quarantines continue across the nation, many are currently unable to benefit.