Canadian Oil Sands
Canadian bitumen producers hope to more than double their output to 5.2 million b/d by 2030. In contrast, we forecast 2030 production between 2.3 and 4 million b/d, depending on WTI prices. The average project already built or under construction remains marginally profitable even with WTI below US$70/bbl, but later projects will suffer. Pipeline bottlenecks, labour shortages and rising borrowing costs already trouble smaller operators. Access to more diverse markets would support WCS, offsetting some of these problems.Oil Market Snapshot
Brent briefly hit $71.20/bbl on 28th November, following OPEC's decision not to reduce production. We have cut our 2014 and 2015 price forecasts to $101.13/bbl (from $102.36/bbl) and $81.78/bbl (from $91.15/bbl) respectively. Eurozone and Chinese economic growth both look weaker, but People's Bank of China interest rates cuts and potential strategic procurement could increase Chinese oil demand more than expected. Persistent low prices will risk production growth from LTO in particular, potentially producing a price rebound long-term.Oil Market Snapshot
Brent fell to $82.6/bbl on 16th October month-to-date as OPEC members refrained from production cuts and ICE Brent Futures contango steepened. On account of weaker fundamentals and bearish futures trading, we now forecast average Brent of $102.36/bbl for 2014 and $91.15/bbl for 2015. A potential near-term OPEC decision on production cuts could lead to oil prices above our forecast for 2015; however cuts might not result in lower exports. A prolonged period of low prices would translate swiftly into delayed production of US tight oil and eventually other upstream projects.
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