Deloitte

Deloitte

October 01, 2013 10:00 ET

Long-Term Oil Futures to Remain Soft Despite Recent Spot Price Increases

Deloitte September 30, 2013, forecast demonstrates the minimal long-term effects of geopolitical events

CALGARY, ALBERTA--(Marketwired - Oct. 1, 2013) -

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While the current conflict in Syria has put upward pressure on the current spot price for oil and on short-term oil futures, a Canadian domestic oil and gas forecast released today by Deloitte's Resource Evaluation & Advisory practice indicates that the long-term futures for WTI are still soft and point to a long-term price near US$85.00/bbl by 2018.

In the commentary accompanying Deloitte's September 30, 2013, forecast, Andrew Botterill, Senior Manager, Resource Evaluation & Advisory, compares the short- and long-term price impacts of similar geopolitical events from recent history in order to demonstrate what he believes is the long-term impact on market confidence and oil price.

"It is no secret that when geopolitical events cause tensions to rise, the price of oil also rises," said Mr. Botterill. "This is especially true with conflicts, like the one in Syria, that take place in or near the large-scale oil-producing areas of the Middle East. It raises fears that the supply of oil may be in jeopardy, and that has a swift impact on the short-term price of oil. While we monitor current events closely, we also know that our forecast needs to take a longer view. We find that long-term futures markets are a better barometer of long-term market confidence."

In his forecast commentary, Mr. Botterill demonstrates the rationale behind the current Deloitte forecast by comparing the short- and long-term futures price for WTI oil during the 2006 Israel/Lebanon conflict and North Korean nuclear missile-testing crisis, as well as during the 2011 conflicts in Egypt and Libya.

"In both cases, comparisons reveal that short-term futures and spot price are much more sensitive to geopolitical events and can fluctuate greatly," Mr. Botterill explains. "Long-term futures are much less volatile and more representative of supply and demand in the oil market."

Deloitte's September 30, 2013 forecast shows WTI oil increasing slightly to US$100.00/bbl for 2013, decreasing to US$95.00 for 2014 and eventually leveling out at US$85.00/bbl by 2018. Deloitte continues to forecast a $5.00/bbl differential between WTI and Edmonton par that will decrease to $2.00/bbl over the long term to match pipeline tariffs between the two markets.

With respect to natural gas, Deloitte's September 30, 2013 forecast shows natural gas at an Alberta AECO real price of C$3.00/Mcf in 2013, rising to $C3.45/McF for 2014 and up to C$5.00 by 2021. Deloitte's NYMEX real price is forecast at US$3.80/Mcf throughout 2013, rising to US$4.00/Mcf for 2014 and up to US$5.50 by 2021.

For Deloitte's complete oil and gas price forecast dated September 30, 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.

Contact Information

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

    Deloitte
    Jeannie Tsang
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    www.deloitte.com