Canadian Oil Prices

Oil prices are down from their 2022 highs but are expected to remain near record levels, which will continue to be a boon for Canada’s energy sector. Despite economic headwinds, analysts at Deloitte Canada expect the price for Edmonton City Gate, a benchmark crude oil in Canada, to hover at around $101.35 per barrel.

That’s down from the 2022 average of over $119 per barrel but still robust enough to cause headaches at the pumps and a windfall for oil and gas producers. Meanwhile, the price for Western Canadian Select, another benchmark, is expected to average $74.30 per barrel, compared to $96.80 in 2022.

South of the border, the price per barrel for West Texas Intermediate is projected to average $80 per barrel, down from $94.41 in 2022 but still above the average price over previous years. Others are more bullish on West Texas Intermediate, with Morgan Stanley increasing its 2023 forecast for global oil demand by 36%. The investment bank cited China’s economic rebound and recovery in air travel as reasons for the bullish call.

It expects oil demand to rise to 1.9 million barrels per day (bpd), up from a previous forecast of 1.4 million bpd to a range of $90 to $100 per barrel.

Why Are Oil Prices Expected to Remain So High?

Global demand for oil plunged significantly during the pandemic. And, more recently, tumbled when China imposed strict COVID-19 restrictions, limiting industrial activity. Now that the Chinese economy has reopened, analysts believe demand for oil from the world’s second largest economy will outstrip supply.

It may take some time for this to trickle down, though. Analysts believe China accelerated the pace of its crude oil stockpiling in 2022, adding approximately 740,000 bpd to storage tanks in 2022, up from 170,000 bpd in 2021.

Demand for oil may not be as high as initially expected, but eventually that stockpile gets used up. As a result, oil demand is expected to climb by 1.9 million bpd to a record 101.7 million bpd in 2023.

This is also backed up by the Organization of the Petroleum Exporting Companies (OPEC), which believes demand for oil will be strong on a return to normal life in China and rebound in passenger travel. China’s plan to expand fiscal spending to help its economic recover is expected to fuel increased demand in manufacturing and construction.

All of this should help energize investor optimism and juice oil prices, and be a boon to Canadian energy stocks, which is the second largest sector, accounting for more than 19% of all holdings.

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The energy sector was the biggest winner in 2022 and could be again in 2023, with prices expected to remain near record levels. With the reopening of the Chinese economy and ongoing conflict in Ukraine, oil prices are forecasted to remain steep.

The trading professionals at Learn-To-Trade.com understand that it will not be smooth sailing; the sector will face volatility with some oil and gas stocks better positioned to perform better than others in 2023.

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