Expected jump in output of up to 500,000 barrels a day could vault the sector ahead of the United States, says TD
Despite the discord between Ottawa and the fossil fuel sector, Canada’s oil industry appears poised to set a global record for production increases this year that could “aid in a soft landing” for the economy, an analysis by Toronto-Dominion Bank suggests.
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“The year ahead is shaping up to be a promising one for Canada’s energy sector,” Marc Ercolao, an economist at TD, said in a report on March 7. “Canada has the potential to be the largest source of crude supply growth to the global market.
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He estimates that an expected jump in output of 300,000 to 500,000 barrels per day (bpd) could vault the sector ahead of the United States.
“In this sense, Canadian oil will continue to gobble up global market share” — about six per cent of global production, Ercolao said.
As a result, the economist said the oil industry “will carry positive impacts for Canadian real (gross domestic product), aiding a 2024 soft-landing scenario.” He estimates the oil and gas sector, which accounts for four per cent of real GDP, could end up boosting Canada’s growth this year by 0.2 to 0.4 percentage points.
“This is potentially impactful as Canada enters a cyclical slowdown, where we expect growth to register under one per cent,” he said.
Canada currently produces 4.9 million barrels of oil per day, placing it fourth behind Saudi Arabia, the U.S. and Russia for output.
However, Ercolao estimates Canadian production this year could soar to a range of 5.2 million bpd to 5.4 million bpd — “a record high” for the sector — if the increase in output tops out at the high end of his range. Even at the low end, the increase in production could outpace that of the U.S., which is forecasted to rise by a “more modest” 170,000 bpd.
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Three of the world’s major energy forecasters are calling for most of the increase in supply to come from non-members of the Organization of Petroleum Exporting Countries this year, mainly Canada, the U.S., Brazil and Guyana.
Based on TD’s estimates, Ercolao said Canada could capture between 25 per cent and 67 per cent of global supply growth, more than the other three major contributors, with each projected to add 200,000 bpd.
The expected production surge is well-timed. It could help the oil sector capitalize on the “record quantities” of Canadian crude the U.S. is currently importing, allowing Canada to secure a larger share of the American import market than the 60 per cent it already holds. Higher oil prices won’t hurt, either, he said.
“This boost in demand should provide a tailwind for the Canadian economy,” he said, with a large chunk of the growth … supported by the completion of the Trans Mountain Pipeline expansion.”
The federal government’s controversial pipeline, years behind schedule and much more expensive than predicted, is scheduled to be up and running in the second quarter. Alberta’s oilsands unleashed record amounts of production at the end of last year to take advantage of the expanded pipeline’s capacity to 890,000 bpd from 300,000 bpd.
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Besides getting more Canadian crude to market, Ercolao forecasts, as do others, that the Trans Mountain’s capacity will help shrink the discount between the U.S. benchmark West Texas Intermediate and Western Canadian Select, possibly to $3 to $4 per barrel from the $18 to $20 that has been in place during the past several years, “which will incentivize production and support industry profitability.”
But the picture for Canadian oil production starts to sour looking ahead to 2025.
Ercolao said he expects the industry to run headlong into fresh pipeline capacity shortages that will push down the price of Canada’s benchmark crude and slow production to a two per cent increase, or 100,000 bpd — less than the historical average of 150,000 bpd.
“Past this, production prospects, including future investment decisions, are clouded by the proposed federal emissions cap on the upstream production sector, along with a suite of policies aimed at curbing downstream emissions and demand, such as the Clean Fuel Regulations,” he said.
But he said some of these challenges could be mitigated if the sector in Alberta is able to push ahead with a massive carbon-capture project being proposed by Pathways Alliance, a group of major oilsands players.
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Canada posted a merchandise trade surplus of $496 million in January as imports fell to their lowest level since February 2022.
Statistics Canada said Thursday the surplus came after a revised trade deficit of $863 million in December compared with an initial report of a $312-million deficit for the final month of 2023.
However, BMO economist Shelly Kaushik noted the details of the report were weak as both exports and imports declined.
“The figures are in line with expectations for economic growth to remain soft to start the year,” Kaushik wrote in a note to clients.
Statistics Canada said total imports dropped 3.8 per cent in January to $61.8 billion.
The move came as imports of consumer goods fell 7.1 per cent due in large part to a 19 per cent plunge in imports of pharmaceutical products. Excluding pharmaceutical products, imports of consumer goods were down 3.8 per cent in January.
Meanwhile, total exports fell 1.7 per cent to $62.3 billion as exports of metal and non-metallic mineral products lost 6.2 per cent. Exports of aircraft and other transportation equipment and parts also dropped 13.9 per cent in January.
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In volume terms, total imports fell 4.1 per cent in January, while exports dropped 1.8 per cent.— The Canadian Press
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OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Press. All rights reserved.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
The Canadian Press. All rights reserved.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
The Canadian Press. All rights reserved.
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