The effect of the COVID-19 pandemic has been profound. Basically, all industries have been affected, with some businesses being decimated by the onslaught of stay-at-home orders and health concerns.
One industry that hasn't been spared is the oil and gas industry. And the reason is simple. As fewer people travel, either by air or road, the demand for fossil fuels has gone down. And simple economics dictate that, as the demand for something goes down, so does the price. And a lower price means less revenue for producers.
But what is the effect of the pandemic on the Western Canadian drilling industry? What is the outlook for 2021? This post will shed some light on these questions in more detail.
The global oil price has been increasingly volatile since the 1970s. Increasing demand in developing countries and rising supply as a result of new oil production in the US has further destabilized the price in recent years.
The pandemic has, however, lead to a massive decrease in oil with prices falling by 40% from January 2020 to May 2020. The reason for this has been twofold:
So, what is the forecast for the Canadian drilling industry in 2021?
It's a vast difference that's brought about by the different ways in which these associations use to count wells, but the takeaway is that it still won't be smooth sailing for the oil industry in 2021.
This is especially worrying when considering that:
But it's not all bad news, though. According to the latest Deloitte forecast report, there will be a return to higher demand for oil in 2021.
According to Andrew Botterill, national oil and gas leader for Deloitte Canada markets are likely to remain flat but the increase in demand due to reopening economies has led to an increase in prices. In turn, this could lead to a turnaround in the industry.
It seems to be a rocky road ahead for the Canadian drilling industry, but there appears to be some light at the end of the tunnel.
It can only be expected that as more vaccines become available and more economies reopen, that prices will show further improvement and signal the recovery the industry needs.