The founder of a Calgary commodities and trading firm says 2017 should be a good year for recovering oil prices.
We could even see $100 oil again within the next five years, according to Tim Pickering with Auspice Capital Advisors.
And his positive outlook doesn’t hinge on the actions of OPEC.
“Regardless of OPEC cutting 500,000 or 1 million or 1.5 million barrels and sticking to that, we’re generally positive and think we’re going to be on a positive trajectory here for some time,” he said. “The supply demand balance is coming back regardless of OPEC.”
Pickering said he doesn’t agree with some forecasts predicting oil will sit in the $40 to $60 per barrel range for a prolonged period.
“What we’re seeing is a much more positive trajectory for the commodity and typically when we see that happen, it lasts for some time,” he said.
Pickering believes enough factors are lining up, including the momentum of the market itself, to feel positive about 2017 and beyond.
“Oil doesn’t like to stay stuck for too long,” he said.
But his outlook isn’t as positive for the labour market in 2017 as he predicts companies will continue to rein in spending and operate as lean as possible with better efficiency and cost-cutting still the top priority for most.
“These companies have been very aggressive and diligent at cutting costs and 2017 is still going to start with those measures very much at the forefront. Businesses are running differently now than three or four years ago.”
In the longer term, along with rallying commodity prices, new pipeline approvals should also provide a big boost for Alberta by reducing the price differential between Western Canada Select (WCS) and West Texas Intermediate (WTI) oil, says Pickering.
“Keystone XL — if it goes forward — what is that going to be worth? I think approval could be worth two-plus dollars in terms of narrowing of the spread, which is sitting at about $15 to $16,” he said.
“But the more important spread-narrowing pipeline is Trans Mountain. That could help narrow differentials by over $5 or $3 billion annually,” he added.