Deloitte says Canadian gas oversupply still dragging prices, but new export routes could help

A tanker loaded with the first cargo of Canadian liquefied natural gas departs from Kitimat, B.C. in this Monday, June 30, 2025 photo provided by LNG Canada. THE CANADIAN PRESS/Handout LNG Canada (Mandatory Credit)

Canadian natural gas prices remain under pressure from oversupply and weak demand, but a new forecast from Deloitte Canada says the launch of liquefied natural gas (LNG) exports and pipeline expansions could offer relief.

In its latest Energy, Oil and Gas Price Forecast, Deloitte says record storage levels and high production have left the gas market struggling.

While short-term prices remain weak, the firm sees opportunities ahead as Canada expands infrastructure to reach global markets.

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The report says the Canadian gas market is oversupplied, with production outpacing demand and storage sitting at the upper end of the five-year range.

That imbalance has pushed prices at Alberta’s AECO hub to extreme lows. In recent weeks, spot prices even dipped below zero, forcing some producers to cut output.

However, Deloitte expects modest improvement later this year.

The firm forecasts benchmark natural gas prices (AECO) averaging about US$2.20 per million British thermal units (mmBtu) in the second half of 2025.

By 2026, prices are expected to rise further as export markets absorb more supply, eventually approaching US$4.00/mmBtu by 2032.

LNG exports and Trans Mountain expansion key to recovery

The report points to LNG as Canada’s best opportunity to rebalance the gas market. With LNG Canada shipping its first cargo from Kitimat, B.C., Canadian producers now have a direct link to Asian buyers.

Deloitte says expanding export capacity will help ease domestic oversupply and lift prices, but the shift won’t be immediate. The firm cautions that LNG projects will take time to ramp up and that domestic gas prices could remain volatile until global demand catches up.

On the crude side, Deloitte says Canadian producers are in a stronger position thanks to the completion of the Trans Mountain pipeline expansion.

“While we used to deliver almost all of our volumes into the U.S., having those volumes go to the West Coast and offers has narrowed our differentials,” said Andrew Botterill, energy, resources and industrials partner with Deloitte Canada.

“So all companies in Canada are getting a little bit better price than they would have maybe last year and it’s just that competitive market and the recognition that I am seeing go a few different directions.”

The report notes that the project gives oil companies direct access to Pacific markets, reducing reliance on U.S. pipelines and helping narrow the discount on Canadian heavy crude, though they remain at the mercy of global supply and demand.

The forecast also projects U.S. benchmark West Texas Intermediate (WTI) will average about US$72 per barrel in the second half of 2025, dip to US$67.30 in 2026, then gradually climb toward US$74.65 by 2032.

Even with the added capacity though, Deloitte warns Canadian oil prices remain exposed to global forces, including OPEC+ production decisions and geopolitical instability.

Impact on consumers

For Canadians, Deloitte’s forecast suggests natural gas prices will eventually climb, meaning heating costs are likely to rise in the years ahead.

The forecast also suggested that governments face a challenge in balancing support for export growth, with keeping energy affordable and meeting emissions targets.

Industry observers welcomed Deloitte’s outlook but stressed that execution and timing will be critical, pointing to risks such as project delays, regulatory hurdles and global policy shifts on climate and energy demand.

Deloitte adds that Canada’s natural gas oversupply won’t disappear overnight, but LNG exports and new pipelines offer a path toward balance.

“Canada’s energy sector may be on the edge of opportunity, but timing and execution will matter more than ever,” Deloitte said in the report.