Investors with stakes in Canada’s oil industry are on edge as OPEC‘s recent decision to increase production adds pressure to a market already shaken by U.S. President Donald Trump’s tariff policies.
Crude oil prices have fallen sharply, dropping from over $71 USD per barrel in early April to below $60 USD since the start of May—reaching the lowest level since 2021.
Waqar Syed, head of equity research in energy services at ATB Capital Markets, says while trade tariffs are a concern, falling oil prices pose a much greater threat to Canadian producers.
“They’re certainly not helpful. Oil prices are falling, and tariffs will raise input costs. That’s a squeeze on profit margins,” said Syed. “But the bigger issue right now is oil prices.”
OPEC claims it can boost production by 1.2 million barrels per day, but Syed believes many members are already exceeding their quotas. He expects the group will revise its forecast, which could ease the predicted price drop. Some analysts warn oil could fall as low as $40 USD a barrel, but Syed sees prices stabilizing between $58 and $60 USD.
“There’s talk of demand growing by 1.2 million barrels a day, but that seems too high. OPEC is aiming to grow market share, not reduce output. They’re lifting quotas. That creates imbalance—and when that happens, prices fall,” he explained.
Syed notes that Canadian midstream companies, which transport oil, are less affected by global price swings. He adds that Canadian producers are somewhat shielded compared to U.S. counterparts, since their pricing is tied to WTI benchmarks.
“Midstream companies don’t get hit hard unless volume drops. But if WTI falls below $60, profit margins shrink. Canadian companies are a bit more insulated than U.S. firms because their revenue still tracks WTI prices,” Syed said.
Natural gas is showing stronger performance within Canada’s energy sector. Syed attributes this to gas being less exposed to global instability, unlike oil, which is more vulnerable to tariffs and changes in OPEC policy.
If oil prices fall further, Syed expects a significant drop in U.S. drilling activity, which is already slowing. He warns that if reduced drilling doesn’t balance the global market, prices could dip to $40 USD per barrel. However, he considers this scenario unlikely.
The OPEC move stems from a conflict between Saudi Arabia and member nations such as Iraq and Kazakhstan, which have not adhered to agreed quotas. Syed says the Saudis are signaling leadership and demanding accountability from members who have exceeded limits.
“The Saudis have stayed disciplined, but others—like Iraq, the UAE, Kazakhstan, and even Russia—haven’t. Now, those who cheated may have to cut back to make up for it,” he said.
Syed also cites the U.S.-China trade war as a key concern. Fewer shipments from China to American ports suggest weakening demand, raising fears of a U.S. recession and a slowdown in China. These economic troubles could further depress oil prices.
If both major economies continue to struggle, Syed says OPEC will find it harder to justify boosting output. But with so much uncertainty in the global economy, he believes any forecast remains speculative.
“If the U.S. slips into recession and China slows down, demand drops. If supply outside OPEC grows by 1.2 million barrels a day and demand lags, then OPEC must cut output just to keep the market balanced,” he said.
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