Deloitte report points to global energy volatility, continued pressure on Western Canada gas prices

Anita Anand was in Calgary to speak with the Chamber of Commerce, highlighting the role Alberta energy plays in international relations amid uncertainty.

A new report from Deloitte says global energy markets are facing renewed volatility due to geopolitical disruptions as Western Canada’s natural gas sector continues to grapple with regional pricing pressures despite strong North American supply.

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In its latest quarterly price forecast, Deloitte says instability in the Strait of Hormuz has significantly tightened global liquefied natural gas (LNG) supply and amplified uncertainty across energy markets.

The report says the disruption has sharply reduced vessel traffic through the Strait, a critical export route for LNG, leading to increased prices in Europe and heightened competition for supply.

At the same time, diverging storage levels across regions are shaping how markets respond to the shock, with Europe facing tighter conditions while parts of Asia rely on surplus inventories to soften the blow.

LNG disruptions ripple across global markets

The Strait of Hormuz, which handles a significant share of global LNG exports, has become a major chokepoint amid ongoing conflict in the Middle East, the report says.

According to the analysis, daily shipping traffic through the route dropped dramatically in early March, effectively signaling a near shutdown and triggering a supply shock that pushed European natural gas prices higher.

Europe entered 2026 with relatively low storage levels, dipping below 30 per cent, making the region more vulnerable to supply disruptions.

By contrast, North America has maintained strong storage levels, supported by robust production and milder winter demand.

Meanwhile, key Asian importers such as Japan and South Korea have relied on surplus inventories built up in 2025 to manage short-term shortages.

The report says the situation has prompted some buyers to seek more flexible LNG delivery arrangements or longer-term contracts to hedge against future disruptions.

Western Canada faces pricing pressure

Despite global volatility, North American natural gas prices remain relatively stable, with benchmark pricing held in check by strong supply and healthy storage.

However, the picture is different in Western Canada.

The report notes that Alberta’s AECO natural gas prices continue to lag behind U.S. benchmarks, in part due to a slower-than-expected ramp-up at the LNG Canada export facility in Kitimat, B.C.

While the project began commercial operations in mid-2025, export volumes have yet to reach full capacity, limiting its ability to absorb excess regional supply and support prices.

As a result, the price gap between AECO and the U.S. Henry Hub benchmark has remained wide, putting pressure on producers.

Deloitte says this environment is increasing the importance of strategies such as firm transportation agreements, hedging, and the use of storage to manage price exposure.

Still, the report projects a moderate recovery in Western Canadian gas prices later in 2026 as LNG Canada moves closer to full operations.

Oil prices swing amid supply uncertainty

Oil markets have also seen sharp swings in recent months, driven in part by the same geopolitical tensions affecting LNG.

The Strait of Hormuz is a critical route for global oil shipments, with roughly 20 per cent of the world’s supply passing through the corridor, the report notes.

While some Middle Eastern producers have rerouted shipments through alternative pipelines, spare capacity remains limited, contributing to upward pressure on prices.

The report says these disruptions have narrowed the discount typically applied to Canadian crude, as buyers look for more stable sources of supply.

At the same time, global demand has been relatively soft, creating a complex balance that has seen prices rise and fall sharply in early 2026.

Deloitte forecasts benchmark West Texas Intermediate crude will average about US$85 per barrel in 2026 before easing in the following years as supply and demand rebalance.

Consolidation could accelerate in Canada

The shifting market conditions could also reshape the structure of Canada’s oil and gas sector.

The report suggests merger and acquisition activity may pick up, particularly where companies see opportunities to scale up operations, improve efficiency, or secure long-term reserves.

After several years of declining deal activity, 2025 saw a rebound in transaction value, including major oilsands and Montney plays which is a trend that could carry into 2026.

Deloitte says larger producers may look to consolidate assets or acquire entire companies to strengthen their position, especially in a volatile pricing environment.

Still, the report cautions that consolidation comes with challenges, including regulatory uncertainty and the complexity of integrating operations, systems and personnel.

In Canada’s highly concentrated market where a small number of companies control a majority of production, Deloitte warns that even a single large transaction could trigger broader industry consolidation.

Overall, the report paints a picture of an energy market increasingly shaped by geopolitical risk, infrastructure constraints and regional imbalances.

While North America remains relatively insulated due to strong supply, global disruptions continue to ripple through pricing and trade flows.

Deloitte says the evolving situation makes forecasting particularly challenging, with market conditions shifting rapidly as new developments emerge.

Still, it expects volatility to remain a defining feature of energy markets through 2026, with both risks and opportunities for producers navigating an uncertain landscape.

Ottawa maintains Alberta oil critical for Canada’s energy sector

Foreign Affairs Minster Anita Anand spoke to the Calgary Chamber of Commerce on Wednesday to discuss oil production.

She said Alberta often comes up in conversations with international partners involving energy.

“The entire world is focused on Canada’s energy expertise,” Anand said.

She said many countries around the world are watching Canada for the LNG it can produce.

“They all saw and mentioned Canada’s first shipment of LNG, and are preparing as we are, to try to take LNG Canada further,” Anand said.

Chamber CEO Deborah Yedlin says the minister’s talk showed positivity for the energy sector.

“I found it was an optimistic tone in terms of what it means for resources development and what it means for our energy resources.”