While there is a long list of potential factors that could surprise the market in 2019, OPEC+ supply curbs create a tightening baseline that should lead to higher oil prices as the year wears on.
Intractable infrastructure problems caused Canada to miss out on the high prices that characterized much of 2018. A majority of Canadians now believe the lack of pipeline capacity has become a crisis as current supply lines are tapped out, storage facilities are at capacity and Alberta has instituted a production cut.
The USMCA appears to calm oil industry fears that revisions to NAFTA would endanger investor protections, while Canada and Mexico both have carveouts to avoid vehicle tariffs.
The cancellation of the Trans Mountain Expansion pipeline would significantly hurt Alberta's oil sands producers, which are struggling with midstream constraints and large discounts for their crude.
Upstream investment in new projects in Canada’s oil sands has declined by two-thirds since the oil market downturn in 2014, and there is no guarantee spending will rebound.
Canada's oil market is dealing with transportation constraints while heavy crude producers such as Colombia and Venezuela are seeing output declines and OPEC producers are cutting production.
With existing production facing a stiff market, new oil sands projects might remain too risky for most companies. Suncor Energy’s strategy of handing over much of its cash flow to investors is a sign that oil sands face a rocky future.
While growth in shale has garnered a lot of attention, overlooked is the fact that Canada and Brazil are expected to add a combined 2 mbd over the next five years.
Approval from the federal government of two major pipelines, rising oil prices, and a the potential shift on Keystone XL mean that after two years of contraction, optimism has finally returned to Canada's oil patch.
Although the carbon tax proposed by Canadian Prime Minister Justin Trudeau will likely cause more stress for the country's oil industry, it may lead to approval for much-need oil pipelines.