Due to the tense situation in Global trade and the unexpected increase in production by OPEC+, the price of Crude Oil Product has been severely impacted, prompting drilling companies in Alberta, a hub for Energy in Canada, to shift their focus to Henry Hub Natural Gas.
According to the Zhito Finance APP, due to the tense situation in Global trade and the unexpected increase in production by OPEC+, the price of Crude Oil Product has been severely impacted, leading drilling companies in Alberta, a hub for Energy in Canada, to shift their focus to Henry Hub Natural Gas. Data from the Alberta Energy Regulator shows that the number of new permits for Xinjiang Xintai Natural Gas wells issued in the first quarter of this year has increased by 26% compared to the previous quarter, reaching 308, the highest quarterly total in two years; the number of permits for oil wells, on the other hand, has decreased by 24% to 293, the lowest level since 2021.
In Alberta, the number of Oil & Gas permits for Canadian Natural Resources Ltd. has risen to 88, the highest quarterly level in over a decade, with 59 for Henry Hub Natural Gas and 29 for Crude Oil Product. ARC Resources Ltd. ranks second with 54 permits.
According to data from the International Energy Agency (IEA), Canada is the fourth largest oil producer and the fifth largest natural gas producer in the world, with nearly all Canadian oil and a large amount of natural gas exported to the USA.
Drilling companies in Alberta are turning to Henry Hub Natural Gas amid the collapse in oil prices.
Since Trump announced massive imposition of so-called 'reciprocal tariffs' on imported Commodities and OPEC+ unexpectedly declared an acceleration of oil production recovery, the price of Crude Oil has fallen by $20 per barrel and is now close to $63 per barrel. Canadian heavy oil (WCS) typically has a price discount compared to WTI Crude Oil, which is currently about $9.65 per barrel.
While Crude Oil prices have recently dropped sharply, natural gas prices in Canada have risen from approximately $1.50 per gigajoule to about $2. With Canada's first liquefied natural gas (LNG) export facility set to begin operations along the coast of British Columbia later this year, natural gas prices are being boosted.
Trevor Rix, head of the Canadian Oil & Gas research team at Enverus, stated that price fluctuations are prompting producers in the Montney Formation, located at the border of Alberta and British Columbia, to shift towards gas-rich areas, away from pure oil production zones.
Trevor Rix added that drilling companies are not only looking for natural gas but also seeking natural gas liquids (such as condensate). Condensate can be mixed with oil sands bitumen to enable it to flow through pipelines, and its price is typically higher than that of Canadian Crude Oil. Since the expansion of the Trans Mountain pipeline last year, Canadian oil sands production has been increasing. Trevor Rix stated, "We believe that condensate will be a good investment direction as the demand for oil sands diluents increases in the coming years."
This trend may also be observed in the USA. Kevin Neveu, CEO of Precision Drilling Corp., a drilling contractor in Canada, the USA, and the Middle East, stated during last week's Earnings Reports conference call that the company is seeing increased natural gas drilling interest in the Haynesville and Marcellus formations in the USA. He also mentioned, "Our clients remain cautious about oil drilling." As US Energy Secretary Chris Wright stated at an energy conference in Oklahoma City last week, a price of $50 per barrel for oil is unsustainable for US producers.
