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Deloitte: Futures Show Long-Term Oil Price Declining and Gas Price Remaining Flat


Deloitte's Resource Evaluation & Advisory group released its current Canadian domestic oil and gas price forecast today, along with a stern word of caution for investors. Deloitte's analysis of the trends in futures pricing since 2010 gives a strong indication that oil is on its way down, and that natural gas prices will remain flat as far out as 2021 and 2022.

In the commentary accompanying Deloitte's December 31, 2013 forecast, Andrew Botterill, Senior Manager, Resource Evaluation & Advisory, tracks the futures trends for Henry Hub Gas, AECO Gas and WTI Oil from March 2010 through December 2013.

"The trends suggest that the long-term futures market for gas is predicting continued over-supply in North America," Mr. Botterill comments. "The other interesting trend is the ever-decreasing value of natural gas during the last year of each dataset. The December 2013 futures price for natural gas is $6.04/Mcf. That's a far cry from the $8.50/Mcf futures price listed three years ago."

With respect to WTI Oil, Mr. Botterill notes the key observation is that, regardless of the starting price at the time, the long-term futures price has been in a downward trend since March 2011.

"The moral of the story," says Mr. Botterill, "is that energy companies and investors need to plan with caution and factor in the long-term implications of their decisions. What you see today, you may not be able to realize tomorrow."

Deloitte's December 31, 2013 forecast shows WTI oil at US$95.00/bbl for 2014, decreasing to US$90/bbl for 2015 and eventually leveling out at US$85.00/bbl by 2018. Deloitte continues to forecast a C$5.00/bbl differential between WTI and Edmonton par that will decrease to C$2.00/bbl over the long term to match pipeline tariffs between the two markets.

With respect to natural gas, Deloitte's December 31, 2013 forecast shows natural gas at an Alberta AECO real price of C$3.70/Mcf in 2014, rising to $C3.85/Mcf for 2015 and up to C$5.70/Mcf by 2024. Deloitte's NYMEX real price is forecast at US$4.10/Mcf throughout 2014, rising to US$4.15/Mcf for 2015 and up to US$6.00 by 2024.

For Deloitte's complete oil and gas price forecast dated December 31, 2013, visit www.ajmdeloitte.ca/price-forecasts.html.

About Deloitte

Deloitte, one of Canada's leading professional services firms, provides audit, tax, consulting, and financial advisory services. Deloitte LLP, an Ontario limited liability partnership, is the Canadian member firm of Deloitte Touche Tohmatsu Limited. Deloitte operates in Quebec as Deloitte s.e.n.c.r.l., a Quebec limited liability partnership. Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.

Gord Hawker
On behalf of Deloitte
403-984-3707 ext. 201

Jeannie Tsang

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