Oil and gas producers are bracing for a sharp drop in prices for their key commodities.
The price of Brent crude oil is set to rise more than $3 a barrel, according to Reuters, with West Texas Intermediate crude falling as much as $3.90 a barrel.
Brent has lost nearly $20 a barrel since July 31, 2016, when the global price of crude fell below $60 a barrel after the collapse of the U.S. shale boom.
West Texas Intermediate, which is also known as WTI, fell to $53.70 per barrel from $54.25.
WTI crude has lost about $20 billion since the start of the year.
The steep price drop for Brent oil and the rise in WTI prices have put producers and traders on edge, as they await the arrival of the first oil production permits for new oilfields in the U,S.
The new permits for Canadian oil sands are expected in January, and the U and Canada will begin drilling in mid-January, according the U the U of T and the Canadian Association of Petroleum Producers (CAPP).
“We’re hoping the supply of the oil will pick up, and we think the market will recover from this, and that the market can go back to its normal level of supply,” said David Czerny, president and chief executive officer of Capp, in an interview with CBC News.
“And so the fact that we’re seeing this increase in prices is a good sign.”
“This is a very, very volatile price environment and it’s not going to be a good one for our producers,” said Andrew Lefebvre, a senior analyst with BMO Capital Markets.
“The only thing we’re looking at is how the price plays out over the next year and the next few years, and if we can find a price to keep up with the market that will keep our producers happy and help us generate income,” said Lefbvre, who expects a steep price decline for Brent and WTI oil.
The Canadian oil industry is struggling to adapt to the new economic reality.
In a report released Tuesday, BMO said it expects to lose $30 billion in 2018, and could lose another $1 billion this year as oil prices fall.
The report, called The Oil Shock, also warns that the current glut in oil supplies could worsen, especially as the global economy continues to slow.
As a result, the industry is preparing for a major price drop, said Czarny.
For now, the market is reacting to the news that West Texas is the first field to receive oil permits for its new oil fields in Saskatchewan, according CBC News’ Matt Hutton.
West Texas has already received oil production approval for a new field near Jasper, Sask., and the first drilling has begun.
The next stage of the process is expected to begin in early 2019.
Saskatchewan Premier Brad Wall said Tuesday that the province is working to find a way to ensure the continued supply of crude.
However, he cautioned against relying on OPEC’s supply cuts as a guide to the long-term price of oil.