Oil prices projected to stay at low levels in 2024, report says 

A new report forecasting energy trends estimates global oil prices will be stuck at low levels for the next couple of years. 

The analysis from Deloitte released Tuesday predicts an average West Texas Intermediate (WTI) price — typically regarded as the benchmark for crude oil — of $72 US per barrel this year. 

That depression in price is because of cuts from major producers, record production in the United States and slowing growth in demand, according to the report. 

Oil prices are at their lowest in two years, with prices hovering around 2021 levels. As of Monday afternoon, the WTI price was around $71 US. 

“We do have a lot of production out there, and money spent by energy companies in 2023 is bringing lots of volumes out there, and maybe we’re a little bit more resource and supply heavy than we were last year,” said Andrew Botterill, a partner at Deloitte who leads the energy and chemicals file. 

The Organization of the Petroleum Exporting Countries (OPEC) recently decided to cut 2.2 million barrels a day in the first quarter of 2024. The U.S. took the opposite approach, increasing its production nine per cent in 2023, Deloitte said. 

Demand is forecast to increase by about 1 million barrels per day in 2024, compared with 1.6 million last year, per analysis by the U.S. Energy Information Administration. 

“It’s the pendulum of this energy industry. When prices are high, money is spent. And then, of course, when those volumes come on, things will soften a little bit. So I think this is a little to be expected from where we were.”

Deloitte forecasts the average WTI price will remain low through 2026 before rebounding slightly in the years leading up to 2030 — however, prices still aren’t expected to climb over $80 a barrel.

Alberta’s provincial government is largely reliant on royalties from oil and natural gas. When the price drops, fewer dollars flow into the public wallet. 

The swings can be dramatic. This year’s budget numbers indicate that a $1 change in oil prices pushes revenue up or down by $630 million. That same document forecast a WTI price of $79 US. If the math and forecasts hold at that level, this year’s swing could be more than $4 billion. 

Non-renewable resource revenue for the government is projected to be $19.7 billion in 2023-24. It’s often between a quarter and a third of total revenue for the province. 

“The price of WTI is one of many factors that affect Alberta’s revenue outlook. Others, such as exchange rates and the light-heavy differential, also play a role,” a spokesperson from the finance minister’s office said. 

That benchmark is revised quarterly, with the mid-year fiscal update projecting around $76 US a barrel.

“We know that oil prices will continue to be volatile and fluctuate. The government’s WTI price forecast will continue to be prudent and reflect the best available information on global petroleum fundamentals and geopolitical risks known at the time.”

While lower oil prices may leave the province readjusting its budget, Botterill says consumers can do a version of the same exercise. 

“That’s a nice relief off of the high energy prices that we saw in 2023 for consumers. So I think that’s going to be good.”

Geopolitical tensions, usually a large drag on energy prices, didn’t appear to move oil value much in 2023, according to the report. 

The report also noted that while oil prices aren’t as promising as they were a year or two ago, new opportunities are emerging in sectors like petrochemicals. Deloitte pointed to an investment of $9 billion from Dow for a net-zero project to be built near Fort Saskatchewan, Alta.