As the windchills in North America and the geopolitical situations in the Middle East plummeted to kick off 2018, the price of oil decided on the inverse. Rising to over $60 per barrel, it saw the strongest start to a year since 2014.
A continued decline in North American inventories resulting from OPEC's meetings in November, where the energy powers-that-be decided to extend production cuts into 2018, coupled with the lifting of America's export ban are among the largest contributors to the current trends. While the conflicts in Iran and North Korea, among others, haven't resulted in any major effects on output yet, they have added a bullish sentiment to the markets, according to Warren Waldegger of Fire Sky Energy.
"Looking at the current price, it's obviously quite a bit stronger than we've seen throughout most of 2017. We kind of started in the mid fifties, ended up in the low forties and then steadily climbed back to sixty. We've seen, probably since the middle of summer, a twenty to thirty percent increase in the price of oil, so that's very helpful in terms of cash flow in the industry. We're an industry that recycles our cash flow back into the drill pit and other activities, so that's going to have a positive impact for sure in 2018.
He added that this forebodes well in other ways for the southeast. As long as the price is kept in and around $60, he expects as much as a 20-30 percent increase in activity in the field.
"We started 2017 with about 43 rigs. That had dropped down into 20, and that's southeast Saskatchewan and Manitoba, and includes some potash work. However, just going into the Christmas break we were around 36 rigs, and the expectation is that we'll be back into that level as they ramp up after the new year. We're kind of back to, or at least getting closer to that forty rig level that we saw in early 2017. I think if these prices continue, we could probably see 35-40 rigs working here before the road bans."
Following that, producers will be keeping an eye on the next meeting of OPEC, which takes place in June. Decisions made there will have an influence on the summer's activities.
With the pace beginning to pick up in the industry, challenges also arise with the biggest being, in Waldegger's words, "to attract qualified men and women back to the industry. There's been a couple three years of downturn, and people have left. As things improve, we're going to need them back to do the work in the field, administrate and all those other things we do."