• 4 minutes Ten Years of Plunging Solar Prices
  • 7 minutes Hydrogen Capable Natural Gas Turbines
  • 10 minutes World looks on in horror as Trump flails over pandemic despite claims US leads way
  • 13 minutes Large gas belt discovered in China
  • 5 mins The Downside of Political Correctness
  • 27 mins In the Event of WW3, Oil and/or Renewables?
  • 2 hours Main Stream Media falls into depressed mood today after hearing of the record May jobs report UP 2.5 MILLION JOBS !
  • 2 hours George Floyd’s History
  • 2 hours US and Australia Sign SPR Lease Agreement
  • 15 hours Rioting and Protesting
  • 2 hours Trump waves a Bible
  • 2 hours China To Boost Oil & Gas Exploration, As EU Prepares To Commit Suicide
  • 14 hours Let's try to link the recent events back to the situation with oil production and pricing
  • 1 day Healing, Not Hatred
  • 9 hours Coronavirus hype biggest political hoax in history
  • 6 hours World’s First Integrated Hydrogen Power-to-Power Demonstration Launched
  • 20 hours China’s Oil Thirst Draws an Armada of Tankers
  • 7 hours Model 3 cheaper to buy than BMW 3 series.
  • 1 day Trumps Oil Industry....
A Perfect Storm For Petrochemicals

A Perfect Storm For Petrochemicals

The oil majors have made…

Putin Furious After Major Oil Spill

Putin Furious After Major Oil Spill

After a massive oil spill…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Premium Content

Canada’s Oil Patch Struggles To Survive The Worst Recession Ever

Canada is likely going through its worst-ever recession, with more pain to come in May when the statistics authorities and analysts will have a fuller picture of the economic disaster brought about by the coronavirus pandemic and the measures to curb its spreading.  

The oil price collapse with the demand crash in the Covid-19 outbreak, and the month-long oil price war between Saudi Arabia and Russia are pressuring Canada’s economic activity, more than 5 percent of which comes from the oil and gas sector.   

Canada’s oil industry – which contributed US$77.4 billion (C$108 billion) in direct real GDP to the economy in 2019, or 5.6 percent of Canadian GDP – was hit hard by the double supply-demand shock over the past two months, becoming one of the first collateral victims of the Saudi-Russian spat.

The recovery of Canada’s oil industry after this shock will be slow, considering the fact that the global glut threatens to fill up all available storage by as early as mid-May. Many firms may not survive this price crash.    

Because of the importance of the oil industry in Canada’s economy and trade in goods, overall economic recovery in the country could be slower than analysts had initially predicted and slower than in other advanced economies that are not big oil producers.

Reuters poll of 25 economists at the end of April showed that Canada’s economy likely shrank by 9.8 percent annually in Q1 and is set for a 37.5-percent plunge in Q2.

In a flash GDP estimate in mid-April, Statistics Canada said the economy contracted by 9 percent in March, the steepest one-month GDP drop ever since the series started in 1961. More than 1 million people lost their jobs in March, with employment rate down by 3.3 percentage points to 58.5 percent—the lowest rate since April 1997.

Premium: The Oil Sector That Will Suffer The Most

The energy sector in Canada is now even more pessimistic about its prospects than it was during the 2008 recession or right after the previous major oil price crash of 2014, according to a recent Bank of Canada Business Outlook Survey (BOS).

Most oil and gas firms in Canada “saw the current shock as worse than those in 2008 and 2015 as access to financing had become more difficult. Indeed, while some thought they could withstand a period of low oil prices, many were concerned about access to financing amid declining equity prices, widening credit spreads and a general reduction in risk appetite,” Josh Nye, Senior Economist at RBC Economics, said in a note in early April.

In the flash estimate for March GDP, Statistics Canada said that “Despite the collapse in oil prices and the pullback in the sector’s investment activities, early indications seem to show that the volume of oil and gas extraction and pipeline transportation had not yet been substantially impacted in March as storage facilities were still being filled.”

But in April and through the summer, the suffering in the oil patch will become painfully evident, with companies slashing capital expenditure and curtailing production as demand crashes, storage fills up, and Western Canadian Select barely manages to stay above US$0.00 a barrel these days.

“While it’s encouraging that there’s an agreement to end the irresponsible global oil price war, much damage has been done. The damage to the Canadian energy sector will be longer lasting due to the liquidity crisis triggered by these market manipulations,” Tim McMillan, president and CEO at Canadian Association of Petroleum Producers (CAPP), said after OPEC+ patched up the broken alliance to promise nearly 10 million bpd off the market in May and June.

CAPP works with “federal and provincial governments to help ensure adequate support is in place to enable survival of oil and natural gas sector which is so critical to Canada’s economy,” McMillan said early last week.

The federal government is funding a US$717 million (C$1 billion) program to provide grants to oilfield service contractors to perform well, pipeline, and oil and gas site reclamation work. The program is expected to keep 5,300 jobs in the oil industry at a time when many oil workers are losing their jobs.

Premium: 2 Stocks To Consider As Oil Nears $15

Oil production shut-ins could reach 1.1 million bpd this summer, ATB Economics said this week, expecting Canada’s oil production to slump by 14 percent compared to the over 3.5-million-bpd output in 2019. That is, if things with the pandemic, demand, and oil prices improve by the fall. Most analysts concur that Canadian oil firms are likely to curtail at least 1 million bpd of production in the coming months.   

“There’s no way to sugar-coat it: the recession brought on by COVID-19 and the oil glut will be the worst downturn in Alberta since the 1930s,” Todd Hirsch, Vice President and Chief Economist at ATB Financial, wrote in a note last week.

The recession will be brutal, the recovery “will not be as V-shaped as we’d like, but the downturn will pass much sooner than it did in the 1930s,” Hirsch says.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News