Yahoo Finance Canada, U.S. oil producers to break records through 2030: IEA
Canadian and United States oil producers are set to break output records through 2030, according to the International Energy Agency (IEA) in a new report calling for a “staggering” global surplus of crude by the end of the decade.
The agency’s latest annual oil forecast calls for global oil demand to peak by 2029, and begin to shrink the next year. Researchers see supply capacity reaching 113.8 million barrels per day (bpd), outstripping their demand projection by eight million bpd.
Non-OPEC nations are set to fuel production gains, led by the United States. U.S production is forecast to rise by 2.1 million bpd above 2023 levels by 2030. Meanwhile, Canada’s oil industry is expected to add 680,000 bpd in the seven-year span.
“The United States and Canada break fresh annual records throughout the seven-year period,” IEA researchers wrote in the report published on Wednesday. “By contrast, Mexico posts the single largest capacity loss of any producer in the world due to underinvestment.”
Canadian oil production is forecast to grow 8.7 per cent between 2024 and 2030, based on the IEA’s figures. U.S. production is expected to rise 6.9 per cent over that timeframe.
“It is not the first time the oil markets would see an oversupply, but one important outcome would be downward pressure on the prices,” said agency director Fatih Birol.
In Canada, the IEA notes the impact of additional export capacity thanks to the recently expanded Trans Mountain (TMX) pipeline. The artery stretching from the Alberta oil sands to the Pacific coast nearly tripled its potential flow when commercial operations started on May 1. The IEA expects TMX to be fully utilized by 2028.
Analysts and executives expect the expansion will yield better prices for Canadian producers.
“The once beleaguered project offers a welcome relief to producers as last winter saw a surge in output after turnarounds, increasing rail car usage while depressing local differentials relative to West Texas Intermediate,” the report stated. “Optimization and de-bottlenecking of operations at oil sands projects will add incremental barrels.”
Last week, Canada's largest oil and gas producers faced lawmakers in a House of Commons committee hearing to defend the industry's growth and spell out plans to reduce emissions.
“We have been growing our production,” Imperial Oil (IMO.TO)(IMO) CEO Brad Corson told Members of Parliament on Friday. “We see there continues to be a global market for our products, and we think Canada can play a very important role that brings significant economic benefits to this country.”
Separate from the IEA report, Capital Economics on Wednesday also weighed in on the timing of peak global oil demand. The London-based research firm sees this happening “around 2030.”
“Given the upward trends in renewable capacity shares in recent decades, one might be forgiven for thinking that fossil fuel use is destined to fall away quickly,” assistant economist Elias Hilmer wrote in a note to clients.
“Meanwhile, the lack of alternatives to oil in key sectors, and resilient demand in the emerging world, mean that peak oil demand is unlikely to arrive until later this decade.”
Last month, S&P Global Commodity Insights called for Canada's oil sands to produce 3.8 million bpd by 2030, a 15 per cent increase from current levels.
However, its analysts note warnings from top industry executives about the impact of Ottawa’s proposed emissions cap on the country’s oil and gas sector. Prime Minister Justin Trudeau's government has promised legislation specifically targeting the industry, which is Canada’s largest source of GHG emissions.
"I fundamentally worry that a cap on emissions, the way it's constructed, will be a cap on production," Suncor Energy (SU.TO)(SU) chief executive officer Rich Kruger told Members of Parliament during the June 6 hearing. “It’s unnecessary regulation.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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