In this episode Graeme Pearson, Co-Head of Global Research, and Greg Pardy, Head of Global Energy Research and Canadian Senior E&P and Integrated Oil Analyst, discuss key themes in the global and Canadian energy sector.
Resilience and adaptability in a volatile macro environment
The global energy sector is facing a challenging environment with the focus squarely on the volatile macro backdrop and softness in oil prices. Notably, OPEC's recent production strategy has added to price volatility, with the risk skewing to the downside, resulting in WTI oil prices dipping below $60/bbl. Our stress-test scenario analysis indicates that the average WTI price required to cover capital expenditures and base dividends sits at $56/bbl for 2025 on average across our global coverage group.
Under such conditions, we believe energy producers are more likely to respond by reducing capital expenditures, thereby protecting dividends and lowering breakeven costs. Even if WTI oil prices were to decline further and average $50 in 2025, we estimate year-end 2025 net debt-to-trailing cash flow ratios would average a comfortable 1.3x (with a range), a stark improvement from 2020 levels as management teams have prioritized disciplined net debt reduction and a focus on shareholder returns.
Canada's rise as an energy powerhouse
We highlight Canada’s emergence as a globally significant energy producer, as the country’s oil production has grown from 2 mb/d in 2000 to 5 mb/d in 2024 and is set to reach nearly 6 mb/d by 2030, effectively tripling over three decades.
Canada’s oil production is characterized by long-cycle projects with decades of reserve life, making it a stable contributor to global supply. This production model aligns well with the industry’s current emphasis on financial resilience and shareholder returns.
Trans Mountain Pipeline Expansion transforms Canada's export potential
The 590,000 bbl/d Trans Mountain Pipeline Expansion (TMX) marked a major turning point for Canada's energy sector when it came online in May 2024. TMX has significantly enhanced market access and revenue potential for Canadian producers by easing the pipeline bottleneck that had historically constrained exports. This has led to narrower and more stable price differentials between Western Canada Select (WCS) crude and WTI as spreads have narrowed by approximately US$4/bbl (23%) over the past year, with roughly half the volatility.
Our detailed supply- demand analysis suggests that Canada will maintain a surplus of export pipeline capacity until at least 2027, thanks to additional capacity from lines such as the Mainline, Keystone, and Express.
Greg Pardy and the RBC Capital Markets Global Energy Research Team published the research reports “Energy Insights: All in the Family” and “Energy Insights: Canada – An Energy Powerhouse”, published on April 15 and April 28, 2025. For more information on these reports and RBC’s Global Energy, Power and Infrastructure Conference on June 3-4, 2025 in New York, please contact your RBC representative.
