Oil markets were awash in tears on Friday as investors complained that US president Donald Trump couldn’t run a bath, much less a trade war.
Trump was elected on a promise to lower energy prices, and indeed he has — with US benchmark West Texas Intermediate falling to its lowest in nearly five years since the pandemic in 2020.
Meanwhile, European Brent crude dipped below USD$65 per barrel, sparking fears of a full-blown global economic meltdown.
It comes as stock markets across the world continued to crash and burn, with the S&P 500 suffering a 4.8% drop on Thursday — the worst single-day decline since June 2020. On Friday, the Dow Jones was down another 2,200 points or 5%, while the Toronto Stock Exchange was down 1,142 and erasing all its gains for the year.
In all, oil prices alone have lost more than $10 in just 48 hours since Trump made his infamous ‘declaration of economic independence’ on the white house lawn.
Analysts said the market reaction is a scathing indictment of Trump’s aggressive trade policies, which have escalated tensions with key US trading partners and raised the risk of inflation and recession at home.
“Tariffs give us great power to negotiate,” Trump said Wednesday, doubling down on his stance. But global investors were unconvinced, with the Greenback also extending losses.
Compounding the turmoil, the OPEC+ — which includes Russia and Mexico — unexpectedly announced it would bring back more than 400,000 barrels per day (bpd) starting next month — nearly triple the increase analysts had expected.
“This is a scenario where OPEC+ sees stronger demand, but we’re also facing a hit to demand growth from slower US GDP,” Eric Nuttall, senior portfolio manager at Ninepoint Partners told Bloomberg. “As bullish as I am on energy stocks, this is not a bullish day for oil.”
Despite the carnage, Canadian oil producers are faring better than some of their global peers. That’s because the price gap between Western Canadian Select (WCS) and WTI crude has narrowed to its smallest margin in years, giving Alberta’s oil patch a rare advantage.
On Tuesday, WCS was priced just $9.85 per barrel below WTI — the lowest differential since April 2021, according to Bloomberg’s General Index. The narrow spread means Canadian producers are still receiving relatively stronger returns for their heavy crude, even as global prices slide.
However, that cushion may not last. The WCS differentials are calculated on a monthly average, and with WTI tumbling, Canadian producers could still see lower realized prices in the coming weeks.
Analysts also warn that Trump’s tariffs, including a 10% levy on Canadian oil imports, could disrupt trade flows and pressure margins.
The US Midwest refining sector, which depends on Canadian crude for as much as 70% of its supply, is now caught in a bind. While WCS remains relatively strong, Trump’s tariffs could raise costs for American refiners, potentially pushing up gasoline prices for consumers.
“It would have been epic stupidity to tariff a product that’s critically essential and has no substitution,” Nuttall said, noting that US refineries in PADD 2 — centered around Chicago and including vice-president J.D. Vance’s home state of Ohio — process around three million bpd of Canadian crude.
Even so, US gas prices are already feeling the impact, with analysts warning of an increase of 5 to 20 cents per gallon in some regions even as global oil prices fall.
With oil prices collapsing, global stocks tumbling, and economic uncertainty mounting, investors are bracing for more market turmoil. Deutsche Bank warned that retaliation from U.S. trading partners could deepen the economic fallout, while Goldman Sachs slashed its oil price forecast for 2025, predicting Brent crude will now average $69 per barrel — down 5.5% from previous estimates.
“The risks to our reduced oil price forecast are to the downside, especially for 2026, given growing risks of recession and to a lesser extent of higher OPEC+ supply,” Goldman said in a note to clients.
As investors scramble for safe havens, gold prices have also been volatile. While traditionally a hedge in uncertain times, gold futures dipped slightly as traders liquidated assets to cover losses elsewhere.
The combination of Trump’s trade war and OPEC’s supply boost has thrown oil markets into chaos, leaving investors scrambling to assess the long-term fallout. While Canada’s oil sector has so far managed to hold its ground, the broader outlook for global energy remains deeply uncertain.
“We’re bullish on energy stocks, but not on oil,” Nuttall said. “There are opportunities, but right now, caution is the name of the game.”
