As we head into the new year, we look ahead to new and improved ways of doing things – and GLJ’s most recent pricing forecast is no exception. There has been much discussion and anticipation leading up to the newly revised SPEE guidelines for Canadian evaluator price decks coming into effect in April this year (link here or see the SPEE Website). Effectively, these guidelines provide recommendations that evaluator forecasts should be within 20% above or below strip (or futures) pricing for the first two years for major benchmarks and only provide for inflation beyond year three. Futures contract volumes are largely traded in the front months or nearest term, by the second year there is normally only about 5% of the volume traded compared with the first year, and third year volumes are generally so minor or sparse that they can become misleading in terms of market direction. Because of this scarcity of trades in the third year of futures contracts, these values should be considered under much scrutiny about what they may provide in terms of price guidance. GLJ has released our latest pricing which reflects the principles of the forthcoming SPEE guidelines.
The largest effective changes to our quarterly pricing is in relation to oil and liquids. With the current oversupply stemming from the economic slowdown due to the pandemic, it is only recently that we have observed upside in the price of oil as the world economy slowly makes its way back to normal. But as OPEC+ continues their targeted production cuts, vaccines get distributed, and energy producers continue with reduced development budgets, the global glut in oil in storage should be reduced over the next year or so.