Oil falls as reserves expected to grow
Supply of shale oil from U.S. a ‘game-changer’ in formerly Saudi-driven crude market
The price of crude oil fell Tuesday for the first time in four trading sessions as the global commodity enters a new period of increased volatility.
The North American benchmark, West Texas Intermediate, fell 5.4 per cent to $50.02 (U.S.) a barrel on the New York Mercantile Exchange.
The Canadian dollar, which closely follows oil, slipped to 79.53 cents, down 0.69 of a cent.
The latest dip came after the influential Paris-based International Energy Agency said the dramatic buildup of global oil inventories could continue until mid-2015.
The agency also said while the price of oil will eventually recover, it’s unlikely to reach last summer’s high amid increasing U.S. supply, softening demand in China and growing competition from alternative fuels.
The dramatic rise in the supply of U.S. shale oil is playing “a gamechanger” role in rebalancing a global market once controlled by the Saudiled Organization for Petroleum Exporting Countries (OPEC), the agency also observed in its annual Medium Term Outlook for Oil.
Meanwhile, the fallout continued Tuesday from oil prices that have plunged by more than half since June 2014, from $115 a barrel to $55.
Calgary-based Talisman Energy Inc. said its fourth-quarter net loss widened to $1.59 billion, or $1.54 a share, from a loss of $1.01billion, or 98 cents, a year earlier.
Most of the decline was due to writedowns of $1.37 billion on assets in Texas and Iraq’s Kurdistan region, the company said.
The company said its $8.3-billion deal to be acquired by Spain’s Repsol SA is not in jeopardy. The deal is expected to close in the second quar- ter, subject to the usual approvals.
“Talisman’s assets and people will have an important place in the combined enterprise as we will roughly double Repsol’s upstream business,” Talisman chief executive Hal Kvisle said.
U.S.-based oilfield services multinational Halliburton Co. also said Tuesday it would cut its global workforce by as much as 8 per cent in response to plunging oil prices.
The cuts could affect up to 6,000 people based on Halliburton’s employee count at the end of 2014.
“We are faced with the difficult reality that reductions are necessary to work through this challenging market environment,” the company said in the statement.
“The impact will be across all areas of Halliburton’s operations.”
In a separate report, the Conference Board of Canada said falling oil and gas prices are helping boost con- sumer confidence in Ontario and Quebec, where manufacturers and exporters are expected to benefit both from lower oil and a falling dollar
However, confidence has declined in the western provinces, particularly Alberta, where oil production is concentrated, the Ottawa-based think-tank said.
Overall, consumer confidence rose 2.7 points to 107 in January, though Canadians remain concerned about the state of the labour market, the board said.
Globally, the International Energy Agency said it sees oil capacity hitting 103.2 million barrels by the end of the decade, an increase of 5.2 million barrels a day, based on supply rising 860,000 barrels a day per year. That’s down from the 1.8-millionbarrel-a-day increase seen in 2014.
Canada’s production is expected to grow to just under five million bar- rels a day by 2020, about 810,000 barrels a day more than in 2014, the agency said.
That is 430,000 barrels a day less that previously forecast.
U.S. output is expected to remain a major source of growth for the period, with its oil production expected to hit 5.2 million barrels a day in 2020, up from 3.6 million barrels a day in 2014, the agency said.
The IEA notes that U.S. shale producers can ratchet production up or down in response to prices much more quickly and easily than can their counterparts in the oilsands.
Meanwhile, lower crude prices are not bolstering demand as much as might be expected, in part because demand was already falling. The IEA expects growth in consumption to average 1.2 per cent a year over the forecast period, below the trend of1.9 per cent before the Great Recession. With files from Star wire services