Hear we discuss the diverging trends in the global oil and gas industry in 2024, as some regions and segments will experience growth and resilience, while others will face challenges and uncertainties. The main drivers of divergence are the varying impacts of the COVID-19 pandemic, the energy transition, the geopolitical landscape, and the supply-demand dynamics on different markets and players.
There will bes four key themes for 2024:
US shale recovery: US shale production is expected to rebound from the pandemic-induced slump and reach pre-crisis levels by mid-2024, driven by higher oil prices, improved efficiency, and consolidation. This will boost US energy security and exports, but also increase competition and environmental pressures for other producers.
OPEC+ discipline: The OPEC+ alliance of major oil exporters will continue to manage the global oil market by adjusting their output quotas to balance supply and demand, and support oil prices. The alliance will face internal and external challenges, such as compliance issues, geopolitical tensions, and demand uncertainty, especially from China and India.
Energy transition acceleration: The global energy transition will accelerate in 2024, as governments, investors, and consumers will demand more action and innovation to reduce greenhouse gas emissions and combat climate change. This will create opportunities and risks for oil and gas companies, depending on their strategies, capabilities, and portfolios. Some will invest more in low-carbon solutions, such as renewables, hydrogen, and carbon capture, while others will focus on optimizing their core businesses and returning cash to shareholders.
Natural gas resilience: Natural gas will remain a resilient and growing segment of the energy mix, as it offers a cleaner and cheaper alternative to coal and oil in power generation, heating, and industrial uses. Natural gas demand will be driven by emerging markets, especially in Asia, where LNG imports will increase. Natural gas prices will be influenced by seasonal and regional factors, such as weather, storage levels, and pipeline constraints.
For the Canadian oil and gas market, the article’s findings imply that:
Oil prices will be stable but lower than in 2023: The Canadian oil industry will benefit from the strong and stable oil prices in 2024, which will support its profitability and cash flow. However, the prices will be lower than in 2023, when they reached multi-year highs due to the pandemic recovery and the OPEC+ cuts. The Canadian oil price differential, which measures the gap between the Western Canadian Select (WCS) and the West Texas Intermediate (WTI) benchmarks, will also narrow, as more pipeline capacity will come online, such as the Trans Mountain expansion and the Line 3 replacement.
Oil production will grow moderately but face environmental and social pressures: The Canadian oil production will grow moderately in 2024, as the industry will maintain its capital discipline and focus on operational efficiency and shareholder returns. The main source of growth will be the oil sands, which will benefit from the improved market access and lower operating costs. However, the industry will also face increasing environmental and social pressures, as the federal and provincial governments will implement more stringent regulations and policies to reduce emissions and meet their net-zero targets. The industry will also have to address the concerns and expectations of its stakeholders, such as investors, customers, communities, and Indigenous groups, who will demand more transparency and accountability on its environmental, social, and governance (ESG) performance.
Natural gas will be a bright spot but face infrastructure and market challenges: The Canadian natural gas industry will be a bright spot in 2024, as it will benefit from the growing global and domestic demand for natural gas, especially for LNG exports. The industry will also benefit from the lower production costs and the higher environmental standards of Canadian natural gas, which will give it a competitive edge in the international market. However, the industry will also face some infrastructure and market challenges, such as the delays and uncertainties of the LNG projects, such as LNG Canada and Woodfibre LNG, the competition from the US shale gas, and the volatility of the natural gas prices, especially in the winter months.