Oil prices are down. It means something different in Canada vs. the U.S

Paula Duhatschek · CBC News

· Posted: May 09, 2025 4:00 AM EDT | Last Updated: 10 minutes ago

A steep driblet successful lipid prices successful the archetypal months of the twelvemonth has undermined immoderate plans for lipid companies to "drill, babe drill."

But absorption to the plunging terms of crude has played retired otherwise successful Canada versus the U.S, with companies southbound of the borderline eyeing accumulation cuts portion the Canadian assemblage holds steady. 

Since the opening of the year, the benchmark terms of a tube of lipid has tumbled from a precocious of $80 US a tube to around $60 US this week.

The dip successful lipid prices has been due, successful part, to the commercialized policies coming retired of the White House, according to Max Pyziur, manager of probe with the Energy Policy Research Foundation, a U.S. vigor think-tank. 

While U.S. President Donald Trump campaigned connected a "drill, baby, drill" level and appointed an manufacture enforcement arsenic the country's vigor secretary, the tumult of his trade argumentation has led to wide marketplace uncertainty and fears of a imaginable recession, which would mean little request for oil. 

"It's ubiquitous," said Pyziur, who noted that galore companies ranging from FedEx to Kellogg person lowered their forecasts owed to broader economical uncertainty.

The downward unit connected lipid prices has been compounded by a determination from OPEC+, a radical of large oil-exporting nations, to loosen proviso constraints and bring much lipid onto the market. 

"If you've got anemic request and much supply, it's created a interest that we're going to person excess proviso and that's been driving down prices," said Randy Ollenberger, managing manager of lipid and state probe with BMO Capital Markets. 

In the U.S., Pyziur said helium expects companies volition commencement lowering production.

In a caller missive to shareholders, the head of the largest autarkic lipid shaper successful the Permian Basin said helium believes the manufacture is astatine a "tipping point" for U.S. lipid accumulation astatine existent prices. 

"It is apt that U.S. onshore lipid accumulation has peaked and volition statesman to diminution this quarter," said Travis Stice, CEO of Diamondback Energy, successful a missive to shareholders, who said that institution is dropping 3 rigs and 1 unit this quarter. 

"To usage a driving analogy, we are taking our ft disconnected the accelerator arsenic we attack a reddish light."

ConocoPhillips, whose operations are mostly concentrated successful the U.S., announced this week it was cutting its superior fund from $12.9 cardinal US to a scope of $12.3 cardinal US to $12.6 cardinal US owed to "economic volatility."

U.S. vs. Canada

But that's successful the U.S., wherever the bulk of lipid accumulation involves shale wells, astir of them successful the Permian Basin, located successful occidental Texas and southeastern New Mexico. Shale wells diminution quickly, meaning companies person to support drilling caller ones conscionable to support production. 

"The Permian, right, it's a moving treadmill," said Mark Oberstoetter, caput of North American upstream probe with Wood Mackenzie.

In comparison, Canadian lipid accumulation is dominated by the oilsands. The output of these wells and mines don't diminution astir arsenic quickly. That means portion it costs a batch of wealth upfront to physique these facilities, they mostly don't necessitate overmuch caller concern to support going. 

Over the past week, the terms of lipid has fallen beneath the outgo of profitably pulling lipid retired of the crushed successful the U.S. According to a survey of lipid companies by the Federal Reserve Bank of Dallas, this break-even constituent is astir $65 US per tube successful Texas. The marketplace terms for West Texas Intermediate, a wide utilized benchmark, presently hovers astatine astir $59 US. 

Meanwhile, successful Canada, accepted mid-sized lipid producers often person a break-even terms successful the $50 US to $55 US per tube range. Oilsands companies tin withstand overmuch little prices.

On Thursday, the country's largest lipid and earthy state producer, Canadian Natural Resources, said it could inactive screen attraction superior and dividends to shareholders successful the per-barrel scope of the low- to mid-$40s.

"The largest companies present successful Canada … they person outgo structures that are among the champion successful the world," said Ollenberger, with BMO Capital Markets. 

"They tin withstand WTI prices successful the scope of $40 [US] and inactive person capable currency travel to support production."

In caller years, lipid prices person soared to the grade that companies person astatine times been compared to breached slope machines. But dissimilar successful erstwhile roar times, companies person been conservative, opting to wage down indebtedness and bargain backmost shares alternatively than walk currency connected caller projects. 

"I deliberation we had already, adjacent earlier the downturn, enactment ourselves into a antiaircraft position," said Brian Schmidt, CEO of Calgary-based Tamarack Valley Energy, successful an interview.

"We're not readying connected shutting immoderate rigs down oregon changing our plans yet. And it mostly is due to the fact that our institution tin tolerate, is rather profitable, astatine debased prices."

For now, Pyziur, with the U.S. vigor think-tank, said companies should expect much tumult in prices astatine slightest until the midterm elections. 

He besides said that arsenic immoderate U.S. companies look to ramp down production, Canadian oilsands producers mightiness beryllium capable to seizure a greater stock of the market. 

"That, I think, is an accidental for Canadian upstream producers."