Canada oil industry to see strong profits in 2010: report

Thu Sep 2, 2010 3:14pm EDT
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(Reuters) - Canadian oil producers are likely to widen their bottom line this year, helped by a rebound in global consumption and rising oil prices, an industry report by a non-profit research organization said.

The Conference Board of Canada sees production in the oil extraction industry expanding 4.1 per cent in 2010.

The report said the conventional extraction industry would see increased drilling, but future growth was expected to come from higher oil sands production.

Last year, the oil industry in Canada struggled to cope with recessionary situation across the globe, as weaker consumption and demand resulted in a significant drop in oil prices.

The large drop in prices translated directly to the industry's bottom line, with profits falling 90 per cent in 2009. But the industry managed to remain profitable as it cut costs by about 20 percent.

"Global consumption has rebounded almost to pre-recession levels. As a result, prices have nearly doubled from their lows of 2009, boosting the industry's profitability," economist Todd Crawford said.

The report also said oil prices rose steadily in the first quarter of the year, though they remained below the peak levels, seen in 2008.

The report, however, said continuing uncertainty over the global recovery and high inventories would limit further price increases this year.

"Because activity in the industry is expected to rise in the next few years, companies can expect competition for materials and labor to be fierce. As a result, keeping costs under control will once again be a priority for Canadian companies," the report said.

(Reporting by Ashutosh Joshi in Bangalore; Editing by Don Sebastian)