Field 1: Low oil costs are weighing on sentiment within the oil and fuel sector
In November 2025, Financial institution of Canada workers held consultations in Calgary with leaders from the oil and fuel sector and business consultants. Contributors included producers of pure fuel, typical oil and crude oil from oil sands in addition to pipeline and vitality service suppliers.
Corporations anticipate oil costs will stay at present ranges by way of 2026
Corporations count on oversupply of worldwide oil to maintain the worth of West Texas Intermediate (WTI) round US$60 per barrel in 2026, with a gradual enhance towards US$66 per barrel over the subsequent two to a few years. Supported by the Trans Mountain Enlargement (TMX) pipeline, in 2025 the worth differential between WTI and Western Canadian Choose (WCS) narrowed to close US$12 for many of the yr. It’s anticipated to remain round that degree over the subsequent one to 2 years. Corporations consider that present and proposed capability enchancment initiatives for current pipelines will assist assist a narrower unfold. A number of members famous that improved market entry by way of TMX has elevated using Canadian heavy oil in petrochemical manufacturing in Asia, supporting WCS pricing.
The Alberta Power Firm value (AECO-C)—a Canadian benchmark for pure fuel costs—is predicted to remain round Can$2.50 per gigajoule in 2026, supported by demand from LNG Canada Section 1 (a liquefied pure fuel [LNG] export terminal in British Columbia). Many corporations stay optimistic in regards to the long-term outlook for pure fuel. Some see it because the gasoline of the longer term, notably as creating nations transition from coal to fuel. Over the brief time period in 2026, LNG exports and robust demand from oil sands producers for pure fuel condensate proceed to assist the manufacturing outlook for pure fuel producers.
Typical oil producers face elevated stress, whereas most oil sands initiatives stay viable
Low oil costs are weighing on sentiment, prompting corporations to streamline manufacturing and tighten price buildings. That is very true for typical oil producers, who should reinvest and drill new wells steadily to take care of manufacturing and who require break-even costs to common round US$57 per barrel for WTI. These producing heavy oil offered at WCS costs fairly than WTI costs are extra delicate to decrease costs and are prone to curtail drilling applications inside weeks in response to cost weak point.
In the meantime, oil sands initiatives have a mean break-even value of about US$50 per barrel for WTI, based mostly on Financial institution workers calculations and business estimates. Consequently, oil sands manufacturing, which accounts for almost all of Canada’s crude oil manufacturing, typically stays viable at at present anticipated value ranges. The resilience of oil sands initiatives displays their economies of scale, the long-term nature of operations, out there TMX pipeline capability and a narrower WTI–WCS value differential.
Capital expenditures are anticipated to say no in 2026
Concerning plans for 2026, current bulletins by corporations within the sector point out a 1.7% decline in nominal capital expenditures (Chart 1-A). Regardless of a discount in funding plans, business manufacturing is predicted to rise. That is pushed primarily by pure fuel and oil sands output, the place effectivity beneficial properties—partly on account of consolidation—and out there export pipeline capability proceed to assist larger manufacturing.
