Canadian Energy Sector Mood Up, U.S. Down

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)

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Summary

Canadian energy companies seem keen on expanding production next year, despite lower crude oil prices and other economic headwinds. Their U.S. counterparts feel differently.

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Flows Up for Canadian Pipelines

With U.S. survey data pointing to growing pessimism in the oil and gas sector, various analyses suggest the Canadian energy sector may be able to withstand a lower-for-longer price cycle.

The federal Canada Energy Regulator reported that the number of barrels moving through the Enbridge Mainline, Keystone and Trans Mountain pipelines, three of the nation's largest, were strong through 2024 and during the first half of 2025.

"Combined throughputs across the three systems reached record highs in 2024 and continued to climb in 2025, setting new monthly records above 4.60 million barrels per day," the agency reported Wednesday.

Trans Mountain is the largest of the three, with an expansion project nearly tripling the capacity on the 36-inch, 720-mile system to a total of 890,000 barrels per day (BBL/d). During the first half of the year, the federal government said transit through the system averaged 729,000 BBL/d.

Trans Mountain is the only network capable of directly sending Canadian oil to countries outside North America. Flows peaked in March at 793,000 BBL/d, a month after U.S. Donald Trump announced plans to impose tariffs on Canadian energy imports.

"Although the tariffs were amended shortly after taking effect in early March to exempt products that comply with the Canada-U.S.-Mexico Agreement, it is likely that they had already influenced delivery patterns for the month of March because the shipping schedule would have been set in the second half of February," the government explained.

A new network proposed by Canadian leaders working to insulate the economy from U.S. pressures would be an expansion to the existing Trans Mountain network that could accommodate as much as 400,000 BBL/d in new capacity.

Upstream Gaining Momentum

That would be supported by an expected uptick in drilling and exploration. The Canadian Association of Energy Contractors (CAOEC) published a forecast for 2026 activity, showing that drilling activity is on pace for an increase. By next year, the group expects to see 5,709 new wells drilled across the country, which would be a 2.9% increase from this year should the forecast prove accurate.

Meanwhile, a report from the Canadian Energy Center, mandated by the provincial government of Alberta to promote the sector, said oil sand reserves are around 167 billion barrels, nearly four times as much as in the United States. Alberta's oil production is running at around 3 million BBL/d.

Much of the private sector is optimistic about future developments. Canadian Natural Resources Limited (CNRL) (Calgary, Alberta) outlined the company's 2026 capital-spending budget earlier this week, saying its spending plans support an estimated 3% increase in overall production from 2025.

IIR Energy's Assistant Editor-in-Chief Will Ploch outlined CNRL's guidance in an in-depth article from earlier this week.

U.S. Energy Sector Appears Frazzled

That contrasts with the mood in the U.S. shale oil patch. In its energy survey for the fourth quarter, the Federal Reserve Bank of Dallas reported that activity in sector was subdued. Downbeat for much of the year, and despite political support and deregulation from the Trump administration, survey respondents were again disappointed.

A respondent from the upstream sector said the firm expected West Texas Intermediate, the U.S. benchmark for the price of oil, to remain below $60 per barrel next year, dropping possibly to as low as $45 per barrel and below the point at which many drillers can make a profit.

"Returns on capital expenditures are only sufficient if costs to drill and complete wells remain low," the respondent said. "Our company now runs one drilling rig, compared to three rigs earlier in 2025. Our projected drilling schedule for the next several years contemplates one drilling rig of activity."

By the Numbers

• $45 per barrel oil next year is possible
• 3%: expects increase in overall production from Canadian Natural Resources Limited
• 400,000 BBL/d: new capacity for the Trans Mountain under consideration

Key Takeaways

• Drilling activity is on pace for an increase in Canada.
• Alberta could hold more oil than in the Lower 48.
• Dallas Fed survey reveals growing U.S. energy sector pessimism.

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