OPEC reduces 2015 forecast for Canadian oil production, while Conference Board of Canada issues sad economic outlook

OPEC said Monday that it now expects non-cartel countries to increase production by 850,000 barrels a day in 2015, down from its previous forecast of 1.27-million b/d.

The body trimmed its outlook for Canada by 20,000 b/d, saying falling capital investment and idled drilling rigs will bite into planned production increases, says The Globe and Mail.

The OPEC estimate was released as the Conference Board of Canada issued a pessimistic outlook on the impact of sharply lower oil prices on the Canadian economy.

The Conference Board considers investment in the oil industry will fall by 24 per cent in 2015, prompting further layoffs and government cutbacks, especially in Alberta.

Recently crude prices have risen, with West Texas Intermediate gaining $1.17 (U.S.) – or 2.2 per cent – to $52.86 a barrel, and North Sea Brent adding 54 cents to $58.34.

However, some analysts caution that prices will edge lower as signs of oversupply continue to weigh on the market sentiment. Crude prices typically are weakest in the late winter and early spring, when the winter heating season passes in the northern hemisphere and many refineries shut down operations for maintenance.

Mr. Morse said the market should bottom out some time in March or April, and then slowly begin to recover.

In its monthly crude report, OPEC pointed to signs of higher oil demand from the United States in December and January, and expects global crude consumption to rise by 1.7 million b/d this year, slightly higher than its previous forecast.

But it expects the biggest short-term impact to be on the supply side. With non-OPEC production hit by spending cuts, the demand for OPEC crude should average 29.2 million b/d in 2015, up 400,000 b/d from its previous estimate. The 12-member cartel is currently producing more than 30 million barrels, though supply is expected to fall in vulnerable countries such as Venezuela and Nigeria.

The OPEC analysts expect Canadian production to remain steady in the coming year, after strong growth in recent years.

Matthew Stewart, Conference Board economist, said the Canadian economy will be hit by a drop in business investment as oil companies respond to lower crude prices, which are still down 50 per cent from last June’s peak. Ontario and, to a lesser degree, Quebec, stand to benefit from the surge to the U.S. economy delivered by lower crude prices, and by the decline in the Canadian dollar, which will benefit exporters. In the meantime, consumers will save as much as $1,000 a household on lower fuel bills.