Winter Energy Outlook 2013-14 - Outlook Summary
Winter Energy Outlook 2013-14 - Outlook Summary [PDF 175 KB]
Canadians will likely pay slightly higher prices for natural gas this winter compared to the previous winter, while crude oil and heating oil prices should remain similar to last winter. Wholesale electricity prices in Ontario and Alberta are also expected to be close to last winter's prices.
Economic Growth - Global economic growth remains sluggish, but stronger growth is forecast in 2014. As a result, moderate global energy demand is expected over the upcoming Canadian winter. Risks for the global economy appear mainly to the downside, including ongoing financial sector challenges in Europe, slowdown of economic growth in emerging economies, potential fiscal instability in advanced economies, and geopolitical risks. The International Monetary Fund (IMF) in its most recent forecast predicts global economic growth to average 2.9 per cent in 2013, rising to 3.6 per cent in 2014. This compares to 3.2 per cent growth in 2012. The Bank of Canada forecasts Canadian economic growth to be 1.6 per cent in 2013, strengthening to 2.3 per cent in 2014 with gains in exports and business investment. However, the economy remains vulnerable to the above noted risks in the global economy.
Weather - Environment Canada and the U.S. National Oceanic and Atmospheric Administration (NOAA) forecast normal temperatures for most of Canada and the U.S. this winter. Above-normal temperatures are forecast for the southern U.S. and Northeast states and provinces, while the Canadian west coast is expected to have below-normal temperatures. This will result in average seasonal demand for heating fuels such as natural gas and heating oil for most of North America this winter. However, above-normal temperatures expected in the Northeastern states and provinces mean this region could have below-average demand for heating fuels.
- Canadian and U.S. natural gas prices increased through last winter and into spring 2013, before dropping through the summer months, due to high storage levels and robust U.S. supply.
Figure 1 - North American Gas Storage
- Natural gas demand for U.S. electrical generation is forecast by the U.S. Energy Information Administration to decline by 11.5 per cent in 2013 and an additional 2.4 per cent in 2014 relative to 2012 levels, but remain above 2011 demand levels.
Figure 2 - Natural Gas Price Oulook
- The North American market will remain well supplied with natural gas this winter due to continued robust U.S. production and high volumes of gas in storage. The increased storage volumes could provide downward pressure on prices this winter.
- This winter, Intra-Alberta and Dawn, Ontario (at the Dawn storage hub) prices are expected to average between $2.90 and $3.40 per gigajoule and US$3.40 and US$3.90 per million British thermal units (MMBtu) respectively. Prices at Henry Hub (the U.S. benchmark pricing point) are forecast to range between US$3.25 and US$3.75 per MMBtu.
Crude Oil and Petroleum Products
- Ample non-OPEC supply growth is expected to be balanced by demand growth in non-OECD countries resulting in relatively stable crude oil markets over the outlook period. Ongoing geopolitical tensions, however, particularly in the Middle East and North Africa, could quickly impact supply and cause prices to increase. In the U.S. and Europe, crude oil inventories were very high in October, while petroleum product inventories were quite low. This could result in increased price volatility in product prices if there are supply disruptions or refinery outages.
Figure 3 - Crude oil and Petroleum Product Prices
- The price discount for Western Canadian Select (WCS) relative to West Texas Intermediate (WTI) is expected to be volatile over the winter. Depending on a number of key factors, the WCS discount relative to WTI could be in the range of US$30 to US$40 per barrel over the outlook period.
- WTI prices are expected to average between US$90 and US$100 per barrel. Brent, the North Sea benchmark crude, will continue to trade at a premium to WTI with prices averaging between US$100 and US$110 per barrel. These prices are similar to last winter.
- Canadian heating oil prices will be influenced this winter by distillate inventories in the U.S. Northeast that are 36 per cent below the five-year average, and reduced supply due to recent refinery outages and closures in the U.S. and Caribbean.
- Canadian heating oil prices (including taxes) are expected to average between $1.10 and $1.30 per litre this winter. Gasoline prices this winter are expected to average between $1.15 and $1.35 per litre. These prices are essentially flat from last winter.
- The first commercial transmission line between Alberta and the United States was completed in September 2013, bringing more diversity to Alberta’s electricity supply.
- Wholesale electricity prices in Alberta and Ontario are forecast to remain close to last year’s levels during the winter months. Expected prices range between $80 and $90 per MW.h in Alberta $25 and $35 per megawatt hour (MW.h) in Ontario (not including Ontario’s Global Adjustment).
Figure 4 - Wholesale Electricity Markets
- Residential electricity rates increased in almost all provinces in 2013 and further increases are scheduled in 2014. The need to replace aging infrastructure and the cost of new generation are putting upward pressure on prices.