Economy in Canada’s oil-rich province to shrink 2%

As Fort McMurray rebuilds after last month’s wildfires, officials look to a gradual recovery in global crude prices to boost Alberta’s oil sands in 2017. (Canadian Press/REX/Shutterstock)

TORONTO (ICIS)–Canada’s oil-rich Alberta province is facing another year of recession, with its economy forecast to contract 2% in 2016, Ottawa-based research group The Conference Board of Canada said in an outlook on Tuesday.

The province has been hard hit by the low oil prices since mid-2014.

Nearly all sectors of the province’s economy were struggling, with last month’s wildfires in the Fort McMurray oil sands region in northeast Alberta adding to the woes, the board said.

“Wildfires in northern Alberta temporarily shut crude oil production from the oil sands and hampered economic activity in the region,” said Marie-Christine Bernard, an associate director at the board.

“The good news is that oil prices are improving and a recovery is forecast for the province next year,” she added.

Crude oil prices have recovered from the lows reached at the beginning of this year but “imbalances remain”, with prices expected to continue to increase at a modest pace over the next 18 months, the board said in its outlook.

This slow recovery in oil prices should ease lay-offs and cuts to capital budgets in the oil and gas sectors in the coming months, it added.

Alberta’s economy should return to positive territory next year, fuelled in part by the rebuild effort in Fort McMurray. Parts of the city were destroyed by the fires and about 100,000 people had to be evacuated.

Analysts have estimated that oil sands production in Alberta saw disruptions of up to 1.1m bbl/day during the peak of the Fort McMurray wildfires. The average disruption amounted to 800,000 bbl/day in May.

However, work to ramp up production has begun, with most facilities expected to regain their pre-fire output soon.

Most of Alberta’s oil is exported to refining markets in the US Midwest. Normally, the province produces about 3m bbl/day of oil.

INSET IMAGE: Syncrude mine north of Fort McMurray, Alberta, Canada, at sunset. (Images/REX/Shutterstock)