The latest Deloitte Oil and Gas forecast report examines the impact of the COVID-19 pandemic and winter weather on prices, including for crude and natural gas.

According to the report, crude oil rebounded as vaccines restarted global economies. Oil prices surged in the first quarter of 2021 as oil demand began to rebound, reflecting the optimism of continuous rollouts of the COVID-19 vaccine and improved global economic activity.

Canadian producers have fared well in the first quarter of 2021, with prices returning to pre-pandemic values, the report states. Production levels in Alberta have rebounded at the same time to volumes last seen before COVID-19 struck, as producers accelerated their winter drilling.

However, Deloitte forecasts that the current oil price rally does not seem sustainable with OPEC+ having a significant amount of production still offline. It seems more plausible that the members will agree to increase production in the coming months, Deloitte says, which would push down prices below US$60 a barrel, rather than allow U.S. companies to substantially recover market share and spend more on development.

Canadian light oil producers were supported by high West Texas Intermediate prices and narrow differentials in March, as Canadian light hit its highest value since August 2018, the report states. Increased oil sands supply coming onstream in late 2020 and early 2021 caused Western Canadian Select price differentials to start widening in the first quarter of 2021.

On natural gas, the report finds that production in Canada has remained stagnant as producers aim to maintain current production levels and boost cash flows, a state that’s expected for the rest of the year.

Similar to the United States, prices surged in February in response to cold weather across the country and increased demand from south of the border. AECO prices are expected to remain relatively flat for the spring as companies wrap up a successful winter drilling season.