Price stall prompts caution as oil firms release their results
CALGARY— Higher oil prices are expected to bolster returns as Canadian energy companies report third-quarter results over the next few weeks but observers say a recent stall in the crude price recovery and ongoing oil market uncertainty make increases in production and spending plans unlikely.
Oil prices stabilized in the third quarter with U.S. benchmark West Texas intermediate crude selling for an average of US$40.85 per barrel. That’s up 44 per cent, or US$12.48 per barrel, from a second quarter that included the first-ever negative WTI close in April amid fears that North American crude storage was nearing its limit.
The Edmonton Par price for Canadian light oil jumped by 61 per cent to $49.75 per barrel and the price for oilsands bitumen-blend western Canadian Select rose 81 per cent to $42.31 per barrel, according to a report from RBC.
“While oil prices saw a big jump quarter-over-quarter in Q3, prices continue to be below the levels these companies (with the exception of Canadian Natural Resources Ltd.) require to fund their sustaining
capital and dividends, especially given the current refining margin environment,” said analyst Michael Dunn of Stifel FirstEnergy in a report on Friday that noted soft refinery margins.
“While recent inventory drawdowns are constructive, the oil market remains reliant on drastic production cuts from OPEC+ to restore balance to
the market, as the pace of demand recovery to more normalized levels appears to have lost momentum in the past several weeks.”
Third-quarter reporting season starts next week with oilsands producer MEG Energy Corp. on Monday, followed by Suncor Energy Inc., Husky Energy Inc. and Cenovus Energy Inc. later in the week.