Canada’s energy sector has been hit hard by the recent oil price collapse that was initially set off by the now-ended Saudi Arabia-Russia price war and made much worse by the demand-destroying effects of the global COVID-19 pandemic lockdowns. The impacts on Canada’s crude oil and natural gas sectors have been both dramatic and nuanced. For example, oil supply cutbacks have been rapid and substantial, while there has been virtually zero impact on natural gas supplies. Oil demand has been similarly affected, with refined product demand seeing a large swoon, while natural gas demand has suffered only a modest pullback. And for Canada’s energy exports, these have experienced some jolting swings in a matter of weeks, putting the whole sector under pressure to adapt where possible. Today, we highlight some of the recent market disruptions and their implications.
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It was only a few months ago that Canada was boasting that it, like its southern neighbor, was hitting all-time highs for crude oil production. Production from the nation as a whole was pegged by the Canada Energy Regulator (CER) at just under 5 MMb/d as of January 2020, an increase of nearly 0.4 MMb/d from one year earlier. Recent expansions from the offshore East Coast added about 50 Mb/d, but the bulk of the gain came in the mighty Western Canadian Sedimentary Basin (WCSB) from an increase of more than 0.3 MMb/d in bitumen production in Alberta’s oil sands (Figure 1, covering data through March 2020) over the same 12-month span.
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