Oil’s rise not enough to lift investment: analysts

CALGARY — A recent surge in oil prices will boost the bottom line of Canadian oil and gas producers, but remains well below the minimum level needed to encourage increased investments in the oilsands or conventional oil and gas, energy analysts say.

U.S. benchmark West Texas Intermediate crude prices recovered Wednesday to $52.14 US per barrel after sliding Tuesday, but stopped short of the five-month-high close of $52.22 per barrel on Monday, which was up more than 20 per cent from lows in June.

“Fifty-dollar WTI is not high enough to support a material uptick in oilsands investments,” said Randy Ollenberger, managing director of oil and gas equity research for BMO Capital Markets. “Sustained $60 US-plus oil prices are required to support most projects.”

BMO links the recent run-up in crude oil prices to lower-thanexpected U.S. oil production growth in the first half of 2017, but said it expects second half growth will be back on track.

That means New York-traded West Texas Intermediate prices will remain “range-bound” between $45 and $55 US per barrel, the bank concludes.

In a report Wednesday, GMP FirstEnergy Capital affirmed its forecast for average WTI oil prices to rise to about $56 US per barrel in 2018 from $50 US this year, and to jump to the mid- $60s US per barrel by 2020.

It said normally those prices would lead to an increase in spending on Canadian exploration and production, but producers have been reluctant to make the commitment because the market has been so volatile. It assumes most capital spending will grow by less than 10 per cent next year.