This image provided on Sunday, Sept. 15, 2019, by the U.S. government and DigitalGlobe and annotated by the source, shows damage to the infrastructure at at Saudi Aramco’s Kuirais oil field in Buqyaq, Saudi Arabia. The drone attack Saturday on Saudi Arabia’s Abqaiq plant and its Khurais oil field led to the interruption of an estimated 5.7 million barrels of the kingdom’s crude oil production per day, equivalent to more than 5% of the world’s daily supply. (U.S. government/Digital Globe via AP)

Attack on Saudi plant could raise gas prices between five and 12 cents per litre: analyst

GasBuddy analyst says higher oil prices could raise average gasoline prices in Canada

Higher oil prices spurred by an attack on Saudi Arabian oil facilities boosted the Canadian energy sector on Monday but are expected to result in higher fuel prices for consumers.

Long-suffering Canadian oil and gas stocks were on track to post their best day in nearly three years on the Toronto Stock Exchange.

The index that tracks leading energy company share prices was up as much as 13 per cent just before 2 p.m. EDT on Monday, led by double-digit increases for firms including Encana Corp., Baytex Energy Corp., Cenovus Energy Inc. and Canadian Natural Resources Ltd.

U.S. benchmark oil prices were up more than 15 per cent at the time.

“Our view was that Canadian oil and gas companies were inexpensively priced before. What we’re seeing now is a movement in the oil price, not just at the front end of the curve but also really out through calendar ‘20 and ‘21, which really just means we’re seeing a bit of risk premium creep into the oil price,” said Randy Ollenberger, managing director of oil and gas equity research at BMO Capital Markets.

He says he expects stronger global oil prices to continue to be supported even if the Saudis are able to restore production quickly, translating into more cash flow for energy companies to invest going forward.

READ MORE: Energy prices spike after Saudi oil attack as U.S. blames Iran

Higher oil prices could raise average gasoline prices in Canada by between five and 12 cents per litre over the next two weeks, depending on how long Saudi Arabia production is affected, said Patrick DeHaan, head of petroleum analysis for GasBuddy.

Last week, eight energy companies were dropped from the main Toronto Stock Exchange index because their market valuation had fallen below the minimum level for inclusion.

The cuts included Canada’s two largest drilling companies — Ensign Energy Services Inc. and Precision Drilling Corp. — as lower producer spending has translated into fewer wells being drilled.

Analysts blame the lack of investor interest in Canadian energy companies on the uncertain future of pipeline access to markets, a factor cited by the Alberta government to continue to constrain crude production this year.

“Part of the irony is we could be producing a million barrels a day more by now had we had some of these pipelines, and that certainly would have helped deal with some of the lost volumes here with the outage,” said Ollenberger.

The Saudi outage serves as a reminder to oil customers around the world of the political uncertainties in Middle Eastern countries, said Bob Schulz, a business professor with the Haskayne School of Business at the University of Calgary.

The situation will enhance the reputation of Canadian oil, he said, and may spur Canada’s main customer, the United States, to ensure stalled cross-border pipelines like Keystone XL are approved and completed.

In Washington, U.S. President Donald Trump said he had approved the release of U.S. strategic petroleum reserves “if needed” to stabilize energy markets. He later said expanding domestic energy output meant the U.S. doesn’t need Middle East oil.

It remained unknown on Monday how long it will take Saudi Arabia to bring production back.

“A worst case scenario — with profound implications for the global economy — is a broader regional conflict that puts Gulf oil production, processing and transport in the crosshairs,” said Bill Farren-Price, director of RS Energy Group, in an emailed statement.

Short-term affects in Canada will likely be muted, said CEO Allan Fogwill of the Canadian Energy Research Institute, noting that other OPEC countries have surplus capacity they can bring on and oil will be brought out of storage.

“It’s definitely a positive thing for the Canadian oil sector but to what degree is unclear,” he said.

Dan Healing, The Canadian Press

Like us on Facebook and follow us on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Back in Time

Historical Perspective

COVID-19: Interior Health orders closure of all fitness centres until May 30

The order is subject to revision, cancellation, or extension

Clearwater healthy living classes live-streamed for those in self-isolation

Those interested can follow along with yoga, body conditioning exercises, and mental wellness talks

Q&A: Interior Health CEO answers questions on COVID-19 response

Susan Brown, president and CEO of Interior Health, answers questions regarding COVID-19

From inside the ER: B.C. doctor tells it like it is from the frontlines of COVID-19

‘Stay home. It’s working,’ says ER doctor in a Q&A discussion, ‘And please don’t worry.’

Dogs are property, not kids, B.C. judge tells former couple

Court decision made on competing lawsuits over Zeus and Aurora — a pit bull and pit bull cross

B.C. senior gives blood for 200th time, has ‘saved’ 600 lives

There was no cutting of cake for Harvey Rempel but he’s challenging youth to start donating blood

Trudeau commits $100M to help food banks amid COVID-19 crisis

Funds will help ‘urgent food needs’ for Canadians awaiting federal emergency benefits to kick in

Couple won’t self-isolate after returning from overseas: Cowichan by-law

New law requires 14 days of self-isolation when returning to Canada

How well can cell phones carry COVID-19? Disinfecting may be wise

‘You want to keep it as clean as you would normally your hands’

3M pushes back on Trump administration call to stop sending N95 masks to Canada

3M says it has already been turning out as many of the N95 masks as possible

B.C. health care workers gain access to virtual health care options

During COVID-19 many clinics have closed, leaving health care workers with nowhere to turn

Most Read