Uncertainty rattles global crude prices, puts spotlight on Alberta oil

The volatility of international oil markets hit home again earlier this week, as crude prices tumbled to their lowest levels in more than a year.  

Just a couple of weeks ago, West Texas Intermediate (WTI) prices — North America’s benchmark for crude oil — were around $75 US a barrel. This week, prices skidded to around $66 US a barrel under the weight of ongoing market uncertainty.

“I think it’s fair at this stage to call it an utter bloodbath,” Rory Johnston, a Canadian energy analyst and founder of oil market research company Commodity Context, said on Tuesday, referring to the recent price plunge.   

“There are both fundamentally justified reasons for concern, but at the same time, I think that the voraciousness and pace of the price declines that we’ve seen are not at all justified by the pace or change of the fundamentals that we’re seeing.”

Some market watchers in Alberta believe the market’s volatility is only a short-term issue. Johnston suspects prices will rebound in the coming weeks to a month. On Wednesday morning, the WTI price climbed back over $67 US a barrel, up nearly three per cent.  

“I think the gradual market weakening is longer-term — conditional on OPEC choices for next year — but I continue to think this sharp selling pressure is short-lived and should reverse itself,” said Johnston.

Analysts point to a number of reasons for the decline, including a slowdown in Chinese oil demand as electric vehicle sales grow, the producer group OPEC cutting its forecast for global oil demand growth — marking its second-consecutive downward revision — and also recession concerns. 

The weaker outlook further underscores the challenge faced by OPEC+, which comprises the Organization of the Petroleum Exporting Countries and allies such as Russia, in balancing the market. 

Last week, OPEC+ delayed a plan to start pumping more oil after prices hit the lowest in 2024.

‘Declines could get quickly reversed,’ economist says

Those who are examining the market say it’s too early to panic about prices. 

Mark Parsons, chief economist with ATB Financial, says he expects oil prices to rebound slightly and for the WTI to hover around the mid-$70 range again heading into next year. 

“It’s important to keep in mind that this has really just happened in the last week or so that we’ve had some weakness, and we definitely can go through periods where these declines could get quickly reversed. So you have to look at the longer-term trend,” Parsons told CBC News. 

“We still see WTI pricing sort of in the mid-$70s over longer periods. You’re going to have this short-term volatility, but it’ll tend to average out. And the reason for that is we still expect, you know, we have these OPEC production cuts…