Continued oil production curtailment dampens energy sector investment, Deloitte report says

Canadian oil prices have been relatively stagnant over the past three months, but that means there's less volatility than in previous quarters, according to a report from consulting firm Deloitte.

Part of the reason is that the Alberta government extended its oil curtailment program to the end of 2020.

"The longer curtailment period likely will continue to stabilize Canadian crude oil prices and help maintain reasonable storage levels by ensuring production volumes do not outpace takeaway capacities," the report says.

"With no additional pipeline capacity expected for the Canadian market until [Enbridge] Line 3 in 2020, the extended curtailments should ensure oil differentials do not widen substantially as seen in late 2018."

Deloitte says the longer curtailment will also help maintain reasonable storage levels.

The report says the indications are that the number of producers affected by curtailment will decrease this month from 29 to 16, with the majority operating large oilsands projects.

The firm says uncertainty in global oil markets and declining global economies has cut the demand growth for crude oil.

The extension of crude oil production curtailments in Alberta to the end of 2020 is expected to have a positive impact on Western Canadian oil prices even as global prices fell in the third quarter of this year, Deloitte says.

But the report also says weak gas prices, coupled with the extensions of oil production curtailments, have contributed to the lowest total rig counts in more than 20 years.

Deloitte partner Andrew Botterill says the curtailment policy has also flattened the price forecast.

"It makes it hard for companies to look at investing and trying to grow because they don't have the ability to put all of their production that they have right now in the pipeline," he said.

"So it's slowed investment, but it certainly has it's been good for revenues for companies and protect others from the volatile differentials we saw. But it has had the effect of slowing investment."

Botterill says oil prices are likely to remain stable in the mid-to-high $50sper barrel in the final quarter of this year.