The recent rise in oil prices may not be permanent.
WTI and Western Canadian Select have been hovering around the $30 range for the past few weeks after hitting historic lows in March and April.
Tim Pickering, CIO of Auspice Capital, tells Mix News this is due to a slight rise in demand which has allowed U.S. producers to start using product they’ve had in storage.
However, he says oil output continues to be much higher than demand and this could cause
“It has, especially, U.S. producers looking at bringing production back, it’s getting to that economic level and the big concern with that is storage is still brimming.”
If producers start to expand operations, Pickering believes it could have negative effects on the Canadian sector.
The U.S. has a government reserve, known as the Strategic Petroleum Reserve, where they can store access crude, however, Canada does not.
“When we’re full, we’re full… it definitely puts Canadian production on its heels and I’m concerned about that downside risk,” added Pickering.
He notes a big sign demand is once again close to output levels will be when airlines can return to normal operations.
Pickering expects we’ll have a clearer picture on when the sector can start to return to normal around September.