Oil sector facing $10B loss and record low profit margins
The Conference Board of Canada also predicts that the oil industry's losing streak will last nearly three years and that a return to profitability isn't guaranteed
OTTAWA—An Ottawa-based think-tank says Canada’s oil extraction industry is headed for a $10- billion loss this year, the first time on record it has failed to be profitable two years in a row.
The Conference Board of Canada also predicts that the oil industry’s losing streak will last nearly three years, from the last quarter of 2014 through to the second quarter of 2017.
The board’s report says this year, profit margins will hit record lows to a negative 19 per cent.
It expects margins to be about break even in 2017 and for margins to improve each year to nearly four per cent in 2020.
But the Conference Board says the return to profitability isn’t guaranteed.
It says the oil extraction industry must learn from the past and do a better job at limiting its costs—one area that companies can control.
“At the global level, steady demand gains and a slowdown in new production point to a gradual rebalancing of crude oil markets. This will support much-needed price gains in the near and medium terms, hereby improving the outlook for Canadian producers,” said the report.
“Still, the combination of elevated crude stocks (inventories) and concerns about the uncertain state of the global economy could easily derail any price rallies.”