National Energy Board

www.neb-one.gc.ca

Common menu bar

• Français
• Home
• Contact Us
• Help
• Search
• canada.gc.ca

Breadcrumb

Home > News Releases > News Releases 2007 > National Energy Board's Winter Outlook for Energy Markets

National Energy Board's Winter Outlook for Energy Markets

Oil

High and volatile oil prices to continue

One of the main reasons that the price of crude oil remains high is the tightening of inventories. Overall, demand for oil continues to grow while supply growth is just keeping pace.

West Texas Intermediate (WTI) US$ per barrel

In October, oil prices reached new record highs driven by a combination of Middle East political tensions, the low U.S. dollar, tightening of inventories leading into the highest demand period, and increased futures trading.

In September, the Organization of Petroleum Exporting Countries (OPEC) agreed to raise supply output by 500,000 barrels per day, starting 1 November 2007.

Heating oil prices will follow oil price trends

The price of crude oil makes up about 60 per cent of the price of heating oil. Heating oil prices will likely track crude oil prices as a result, and are expected to be higher this winter than last.

U.S. distillate inventory levels, which include heating oil, have built steadily over the past three months and are currently at levels near the five-year average. This is considered adequate going into the winter months.

Heating oil demand is directly linked to weather. A warmer than usual winter would reduce demand and could move prices lower. On the other hand, an unusually cold winter, or an early start to winter, would increase demand and could force prices higher.

Natural Gas

Natural gas futures prices are expected to remain between $US 6-8 per million British thermal units (MMBtu) this winter.

Natural Gas Futures at 20 October 2007

The price of natural gas in North America currently remains substantially disconnected from its traditional pricing relationship with crude oil; meaning that record high crude oil prices are not pushing the price of natural gas upward significantly.

Stronger U.S. domestic production and higher liquefied natural gas (LNG) imports into the United States have offset recent lower Canadian production.

Overall, the forecast for natural gas supply in North America will be fairly flat over the winter, and should begin building up again late in the season.

Plenty of supply stored up to meet typical winter needs

The 2007 North American gas storage injection season will be at least as strong as, or even stronger than, last year.

A lack of sustained hot summer weather and the absence of major tropical storms in key production areas, along with higher LNG imports and U.S. supply growth, have all contributed to keeping storage levels quite high, and prices moderate.

Once again this winter, Canadians are entering the heating season with above average natural gas storage levels available to them, which will be more than adequate to meet winter heating demand.

Prolonged cold weather could contribute to increasing the price of natural gas, especially if it occurs early in the winter season. However, the abundant storage inventories should help to keep the market at ease.

Electricity

Adequate electricity supply this winter

Provinces and territories should all have an adequate supply of electricity to meet winter loads.

With the exception of Ontario, electricity demand in Canada tends to peak in winter, and the electricity systems are designed to meet that need.

The major hydro-electric generation provinces (Québec, British Columbia, and Manitoba) tend to store water behind their reservoirs, in anticipation of the higher winter heating demand for electricity and the resulting higher prices in competitive wholesale electricity markets.

Alberta's electricity generation is expected to be adequate for the winter, but signs continue to appear that its supply/demand balance is tightening and its generation capacity margin is decreasing. In July 2007, Alberta set four new demand peak records, and issued five level 1 emergency electricity alerts.

Looking ahead, provincial jurisdictions continue to be proactive in planning for near-term to longer term needs, including a diversity of generation and transmission interconnections which ensure electricity supplies are adequate and reliable.

- 30 -

 

Primary navigation (left column)

Date Modified:

2011-10-28