Daniel Yergin, chairman for consultant group IHS, said U.S. and Canadian oil sectors are complementary enough to keep markets viable during the downturn. File photo by Michael Kleinfeld/UPI | License Photo
OTTAWA, June 7 (UPI) -- Even though a weakened oil economy means lower production, North American markets are secure enough to weather the storm, analysts said.
Canada's oil-based economy has been weakened significantly by the downturn in oil prices, off about 50 percent from their levels just two years ago. Some sectors of the U.S. economy, meanwhile, are in decline as lower spending in exploration and production takes a toll on the industry.
Daniel Yergin, vice chairman for consultant group IHS, said combined North American production of 13 million barrels, 80 percent higher than levels common 10 years ago, is enough to keep the market secured during the downturn.
"The scale and resiliency of these resources through a time of low oil prices is striking," he said in a statement.
The latest report from the U.S. Energy Information Administration estimated total domestic crude oil production for April, the last full month for which the government has data, was 7 percent lower year-on-year at 9 million barrels per day. The average full year 2017 production forecast is 8.2 million bpd, though that level was revised higher by 1.2 percent from the last EIA estimate.
From a spending standpoint, a survey from the Canadian Association of Petroleum Producers found spending in the oil and gas sector on pace to decline about 62 percent from 2014 levels. According to CAPP President and CEO Tim McMillan, "times are tough" for the industry.
Canada is the top oil exporter to the United States by far. The report from IHS finds that refineries in the U.S. Midwest and Gulf Coast are tailored for the heavier grade of Canadian oil, while lighter oils from shale basins in the United States are suited well for eastern Canadian refineries. Over the six years ending in 2015, IHS found U.S. oil exports to Canada increased 400,000 bpd.
"In terms of meeting North American refinery demand, they represent complementary rather than competing types of crude," Kevin Birn, a Canadian oil sector analyst at IHS, said. "The integrated North American oil trade allows Canada and the United States to achieve a greater energy security than either could accomplish individually."