In this week’s The Seven… 

• System shock - Oil prices spike on Middle East conflict
• It’s finally here –  LNG Canada poised for first shipment
• Staying cautious  - Consumers not super keen to spend
• Powering AI - Data centres and grid constraints
• Next week - Our new Alberta outlook!
• Interesting Fact: Where is the natural increase in Canada?
• Chart of the Week: Comin’ or goin’? The source of net interprovincial migration to Alberta

“I have a tariff concept, Mark [Carney] has a different concept, which is something that some people like, but we’re going to see if we can get to the bottom of it today.” —President Donald Trump, June 16, 2025

The geopolitical sand keeps moving under our feet. As the G7 descended on beautiful Kananaskis Alberta, U.S. trade policy was overshadowed by the escalating Middle East conflict. President Trump left the meetings early to attend to these matters.

There was no trade ‘deal’ to be had between Canada and the U.S., but instead promises of something in 30 days. Tariffs are still a risk to the global economy, but less so than feared on April 2 —so-called Liberation Day. We are in phase 2 of the trade war with the U.S. administration shifting towards bilateral deals.

Big news for Canada: the first liquified natural gas (LNG) will be produced very soon for export (as early as this weekend) from LNG Canada phase 1. LNG is a game changer for the energy sector, supporting higher prices and exports to non-U.S. markets.

Watch for a couple releases from us next week: ATB’s Alberta Economic Outlook comes out Thursday, and I’m talking office real estate trends with an in-house expert.

In other news, the Oilers came up just short, but the team should be proud. As a province and country, we should be proud—it was another great run. And it was an economic jolt for downtown Edmonton.

System shock - Oil price spikes on conflict

The conflict between Israel and Iran has sent oil prices above $US 75/bbl. The biggest risk in our view is that Iran could halt oil shipments through the Strait of Hormuz, a critical oil chokepoint that transports about a fifth of oil consumed globally.

This conflict, along with tariffs, risks unwinding some of the progress on global inflation.  It won’t be helpful for the Bank of Canada, which is waiting for more reassuring inflation data before cutting.

The severity of economic impact depends on duration and how the conflict escalates.  We, for now, assume a descalation, but it’s a risk we’re watching closely. For the year, we remain cautious on oil prices due new OPEC+ supply and weaker global growth, and for now are keeping expectations for WTI to average mid to high 60s this year.

Here in Alberta, higher prices bring a temporary lift to producer revenue and government royalties, but we don’t see companies ramping up their capital spending in response to such a short-term swing. Our forecast is for oil and gas spending to edge down slightly this year on the weaker medium-term outlook for crude prices.

It’s finally here - LNG Canada phase 1 poised for first shipment

Canada is now in the global LNG export game.

The country will soon be shipping significant quantities of liquified natural gas (LNG) enroute to Asia via LNG phase 1 from Kitimat, BC. Reuters is reporting that the facility could be producing its first LNG this weekend. At least one tanker is enroute to Kitimat from Japan. For the supply chain nerds, see this real time tracker.

This a structural (and much overdue) improvement for Canadian gas producers, who have been landlocked with few options to ship their gas. The result has been steep discounts relative to North American and global benchmarks. LNG Canada phase 1 has capacity to produce 1.84 billion cubic feet per day.

Woodfibre and Cedar LNG are under construction, and plans for Ksi Lisims LNG are advancing. There are also plans in the works for phase 2 of LNG Canada’s facility, which would double capacity.

Staying cautious - Consumers not super keen to spend

The Canadian consumer has slowed down their purchases, held back by a sluggish job market and trade uncertainty.

There’s lots of noise in the retail data, so you need to be careful not to draw conclusions based on one or two months. At first glance, the Canadian retail numbers released today look decent—up 0.3% in April and building on March’s increase. But that’s after a decline in both January and February. We suspect that the lift in vehicle sales was tariff front-loading as people try to get ahead of price increases. Further, the advance estimate shows a 1.1% drop for May. If that holds, we’ll be back below December 2024 levels.

As for Alberta, it’s a similar story. Year-to-date sales are holding up relatively well (6.3% vs. 5.2% nationally over 2024) but monthly sales have hardly budged since January after a run-up in the second half of 2024.

We’ll dig further into the retail data next week.

Sound familiar? U.S. Fed also in ‘wait and see’ mode

When faced with extreme uncertainty, what do you do? The Federal Reserve in the U.S. (the Fed) is choosing to do nothing.

In a widely expected move, the Fed paused interest rates again this week due to uncertainty over the inflationary impact of tariffs and a desire to assess incoming economic data. The U.S. job market remains solid, giving them leeway to be patient under their dual inflation and jobs mandate, though they signaled two cuts could be coming later this year.

If this all sounds familiar, it’s because that is exactly what the Bank of Canada (BofC) has been doing the last two meetings—pausing as it waits to see how the trade war shakes out.

A counterargument is why should the Bank of Canada wait? It’s unclear what certainty will arrive. Isn’t uncertainty the new certainty? Unlike the U.S., the job market in Canada has weakened materially. We see conditions getting worse before they get better, and for this reason still see room for the BofC to cut this year.

Power overload - AI data centres and grid constraints

In a recent Twenty-Four, our ATB Economics summer student Carol Kamel talked about how Alberta is well positioned to bring on new AI data centres—abundant natural gas, colder temperatures, and a deregulated electricity market. One challenge is that the data centres are power hungry and the electricity grid can only handle so much.

Based on current applications, there is over 16 GW of data centre demand,exceeding Alberta’s current peak demand of 12 GW. In response, the AESO has instituted a cap of 1.2 GW for large load data centres seeking grid connection in 2027-2028. This capacity will be allocated pro-rata by early July 2025, prioritizing projects that are advanced, are ready for near-term connection, and don't require new transmission upgrades.

Interesting Fact:  Natural population increase highly concentrated in Canada

In the first quarter, Canada’s population growth slowed to a crawl (only 20,100 people added!) due to declines in temporary residents. There is another slowing factor, much longer-term in nature: there is hardly any population growth coming from natural increase (births minus deaths) anymore.

Over the latest one-year period (ending April 1, 2025), Canada’s population grew by 510,400 people. Only 19,400 (or 3.8%) of that occurred through natural increase. The rest was from international migration.

Interestingly, natural increase is highly concentrated in certain regions as shown in the below chart. Alberta leads, followed by Ontario. As a percentage of the population, Manitoba and Alberta are the provinces with the highest rate of natural increase (Nunavut is the highest if the territories are included). The Atlantic provinces all saw natural decrease, with deaths exceeding births. B.C. effectively broke even.