Agreements to lower global oil production and promising pipeline talk are causing the price of oil to rise and confidence to grow.
On the weekend, OPEC came to an agreement with 11 key non-OPEC countries including Russia to cut production of oil, and the impact was huge. The price of oil is surging, rising above U.S. $57 per barrel and closing on Monday at a solid U.S. $52.83 per barrel. It’s a big change from the low in January of U.S. $27.50 and the relief is palpable.
“It is encouraging to see OPEC coming to these agreements, I think it will be a little more balanced around $50 to $55 a barrel and I think that's what we can expect going into 2017,” said Todd Hirsch, Chief Economist, ATB Financial.
It’s a sign of hope for thousands of people who lost their jobs during the downturn, though most know it will be a long time before the industry booms again.
“Even though oil's going up it doesn't necessarily mean jobs are going to be available, people have to do their budgets, it'll be a year or two,” said Lori O’Connor, who was laid off from an oil and gas company in August and is ready to take any job she can qualify for in any field.
While the optimism is nice, it’s tempered by a note of caution from industry-watchers who say it’s too soon to tell if the gains are a sign of stability.
“The fundamental issue is what's going to happen with the U.S. supply of fracking, that supply can go back on stream now a lot sooner than it could years ago, so let's wait and see,” said Bob Schultz, Haskayne School of Business.
For now, the oil patch is being flooded with positive news, including an indication that U.S. President-Elect Donald Trump will soon move to approve the Keystone XL Pipeline that will take Alberta crude to the gulf coast.
There is also optimism that approval of the Energy East pipeline will get back on track after Ottawa named three new members to the National Energy Board.
