The oil industry in Alberta is bracing for difficult times ahead, with WTI prices crashing to $60 per barrel and uncertainties about oil demand growing in a world of trade and tariff wars.
Last week, the tariffs announced by the Trump Administration and the decision by OPEC+ producers to add in May more barrels to the market than expected crushed oil prices, with WTI Crude, the U.S. benchmark, crashing to $60 per barrel—the lowest level in four years.
The benchmark U.S. oil price, against which Alberta’s producers plan and budget their activity, dropped by around $10 a barrel in just a few days, and fears are that prices could slide further into the mid $50s per barrel if trade war-fueled recessions crush oil demand.
Even the $60 per barrel WTI price is already painful for Alberta and its oil producers and oilfield service providers.
The province may see a larger-than-planned budget deficit. At the end of February, Alberta guided for a budget deficit in 2025 based on an assumption that WTI Crude oil prices would average $68 per barrel this year.
In the 2025 budget, the province’s economists said that “Stormy skies are on the horizon for Alberta’s economy after ending last year on a solid footing.”
The storm has already hit global markets and oil prices, dragging the WTI price $8 a barrel lower than the 2025-2026 forecast of the Alberta government.
Related: Taiwan Invested $165 Billion. Trump Hit Back With Tariffs.
Canada was spared any new tariffs in last week’s announcement of tariffs on nearly all other countries and penguin-inhabited territories. But Alberta and its oil producers and drillers must now brace for the economic fallout from the trade wars.
“The short-term pain and unpredictability right now is hard to stomach,” Kevin Neveu, president and CEO at Precision Drilling, told CTV News.
Oil prices so low are already impacting production, the executive said.
“We’ll end up having rig workers without jobs for weeks or months,” Neveu added.
Alberta’s Finance Minister Nate Horner sought to reassure the energy industry and investors that the province’s budget oil price of $68 per barrel is for the average of 2025, not a particular moment in time.
“We are monitoring the situation and expect that oil prices will eventually stabilize,” Horner said in a statement carried by CTV News.
Alberta’s oil patch is currently in a wait-and-see mode, but it could cut some capital expenditure if these lower oil prices persist, according to Mark Parsons, chief economist at ATB Financial.
“It’s still early, but it’s something you’re watching closely,” Parsons told The Canadian Press.
“If these low prices persist, you might be shaving something off your capital expenditure guidance for the year.”
If demand is hit in a U.S. recession and overall global economic slowdown, it wouldn’t matter that Canada’s energy is spared from U.S. tariffs, as oil prices would fall even further, analysts say.
Large investment banks are raising the odds of a recession. Goldman Sachs has just raised these odds to 45% over the next 12 months, up from a 35% chance estimated previously. Goldman’s analysts and economists cited “a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed.”
In the wake of last week’s tariff announcement, JP Morgan raised its recession odds to 60% in a research note titled “There Will Be Blood.”
Commenting on the tariff announcement from April 2, Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote in a weekly report on Friday,
“What Trump delivered on this so-called "Liberation Day" was an economic war declaration likely to cause chaos across global supply chains, while in the short term raising the risk of an economic fallout, hurting demand for key commodities, with energy and industrial metals being the sectors most at risk.”
By Tsvetana Paraskova for Oilprice.com
Oil Price Rout Extends on Recession Fears
By Irina Slav - Apr 07, 2025
- Oil prices are extending last week's losses due to growing fears of a global recession.
- China's retaliatory tariffs and OPEC+'s planned production increase are contributing to the downward pressure.
- Analysts at ING and Goldman Sachs have revised their oil price forecasts downward for the year.\
The price slump in crude oil that began last week has extended into this one as market players’ fears about a global recession deepen.
At the time of writing, Brent crude was trading at just below $64 per barrel, while West Texas Intermediate was changing hands for $60.54 per barrel, both down by over 2% from Friday’s close.
Last week, crude oil prices took a 7% dive after China announced retaliatory tariffs for U.S. imports, matching the U.S. rate of 34% on top of existing levies. The move was universally seen as bearish for crude oil, hence the effect on prices.
“The primary driver of the decline is concern that tariffs will weaken the global economy,” Rakuten Securities analyst Satoru Yoshida told Reuters. “Additionally, a planned production increase by OPEC+ is also contributing to the selling pressure,” Yoshida also said.
ING commodity analysts noted the OPEC+ decision on output as a major factor for recent oil price developments, attributing said decision to three reasons: one, U.S. sanction action against Venezuela and Iran; U.S. pressure on Saudi Arabia to lower oil prices; and a desire to punish overproducers such as Iraq and Kazakhstan.
The Dutch bank followed Goldman Sachs in revising its oil price for the year, now expecting Brent crude to average $72 per barrel in 2025, versus $74 per barrel earlier, ING’s head of commodity strategy Warren Patterson said in a note today.
“For now, our balance continues to show a modest deficit over 2Q25 and 3Q25, supporting our view that prices over this period should move modestly higher from current levels. However, this can change quickly, depending on OPEC+ policy and demand developments,” Patterson wrote.
Rakuten Securities’ Yoshida, on the other hand, predicts WTI could drop to as little as $50 per barrel if the stock market panic extends in time.
Goldman Sachs slashed its oil price forecast on Friday, now expecting Brent crude to average $69 per barrel in 2025 and WTI to average $66 per barrel.
Trade War Just Crashed Crude.
Demand Might Be Next
By Irina Slav - Apr 06, 2025
- Trump’s sweeping new tariffs have rattled markets and raised concerns over global economic growth.
- While crude oil itself was spared from direct tariffs, fears of demand destruction from slower global trade sent prices tumbling.
- Analysts say that the removal of tariffs could limit long-term damage to oil markets.
The reciprocal tariffs that the world has been holding its breath about are here, stock markets are reeling, and crude oil took a dive. The question now is whether tariffs will hurt oil demand for longer or whether the effect will be transitory, with prices rebounding before long.
For now, a majority of observers appear to agree that the tariffs that U.S. President Donald Trump imposed on all of the country’s trade partners would hurt oil demand quite seriously and continue hurting it for their duration.
The International Monetary Fund came out with a statement this, in which its chief, Kristalina Georgieva, said the tariffs were a threat to global economic growth. “We are still assessing the macroeconomic implications of the announced tariff measures, but they clearly represent a significant risk to the global outlook at a time of sluggish growth,” she said, adding, “We appeal to the United States and its trading partners to work constructively to resolve trade tensions and reduce uncertainty.”
It is this argument of damage to economic growth that most analysts are pointing to when predicting dark times ahead for oil prices. As Gabelli Funds analyst Simon Wong puts it, while direct tariffs on crude are not “very meaningful”, “The bigger impact on the oil market is the uncertainty in global demand related to President Trump’s tariffs as global expansion drives crude demand growth.”
Indeed, Bloomberg’s Julian Lee wrote in a column Thursday that even though oil itself was mostly spared from tariff pressure, demand for it was bound to be hurt because the biggest driver of demand was Asia, and Trump slapped Asian countries with some of the highest additional tariffs. Lee sees an economic slowdown in Asia resulting from the tariffs that would inevitably lead to lower oil demand that may last a while.
However, there is a counterargument to be made. The tariffs have tanked oil prices. This means oil is now more affordable for Asian importers. It is an interesting question whether they would miss out on a chance to replenish their stocks of crude—especially in anticipation of an inevitable economic slowdown—or grab it and buy more oil on the cheap.
There is also the question of how long these tariffs will remain in effect. Per Trump’s Vice President, J.D. Vance, the point of these is to bring back manufacturing home. “That's fundamentally what this is about, the national security of manufacturing and making the things that we need, from steel to pharmaceuticals,” Vance told media, as quoted by Reuters.
Not everyone sees it that way, to put it mildly. According to Henry Hoffman, PM of the Catalyst Energy Infrastructure Fund, “The Trump administration's decision to base them on a net-imports-to-imports ratio seems less about reciprocity or fairness and more about wielding a blunt instrument to force negotiating leverage. In doing so, the White House is giving up the moral high ground it often claims in trade talks, opting instead for a high-risk, high-reward gambit.”
This is why the tariffs are unlikely to become a permanent fixture of global trade, hurting growth prospects and sinking oil prices lower. “It’s hard to imagine these tariffs sticking for the long term. They seem engineered more as a provocation—a splashy opening move in a game of tit-for-tat brinksmanship aimed at fast-tracking trade concessions,” Hoffman says, cautioning, however, that they may yet backfire. If that happens, it would hurt emerging, smaller economies the most.
Bad as this is, it means that the biggest oil consumers will remain relatively unscathed. China, which is always the focus of analyst attention when it comes to oil, is already preparing its response to the tariffs—and it’s going to be about stimulus and export market diversification. CNBC cited several analysts from China as expecting a focus on local economic strengthening action instead of retaliatory tariffs, which somewhat ironically suggests the “blunt instrument” may end up benefiting its target. It’s worth noting—as analysts have done—that China has a growth target to reach, and for that, it needs energy, in other words, oil and gas.
China is unlikely to be the only one diversifying export markets and forging or strengthening trade relationships with countries other than the United States—if the tariffs stay. If commentators see them as a blunt instrument for trade negotiations, like Catalyst Energy Infrastructure Fund’s Hoffman, they will be removed soon enough as long as the target countries commit to “fixing” their surpluses with the United States. It might yet turn out to be a molehill instead of a mountain.
Of course, there is always the possibility that the tariffs will remain in place for more than a couple of weeks, which will really set in motion those processes of diversification and trade relationship building. Like the sanctions on Russia, however, tariffs will, in all likelihood, change patterns in the global oil market but not really kill oil demand, regardless of the short-term effect of the tariffs on economic growth prospects.
By Irina Slav for Oilprice.com
