Experts expect production to continue to grow in Western Canada, with export volumes to the U.S. hitting record levels.Todd Korol/Reuters
Growth in global oil demand for the rest of the year is expected to fall to one of its weakest levels since 2001, says research firm S&P Global, which has revised its price outlook for benchmark crude down to as low as the upper-US$40 mark.
The United States in particular will face a sharper year-on-year decline in production than expected, S&P forecast in its latest research paper, released Monday. That’s in part owing to limping demand growth; only the 2008-09 financial crisis and COVID-19 pandemic in 2020 saw lower numbers.
S&P’s price outlook for West Texas Intermediate for the rest of the year is now in the upper-US$40s to low-US$60s range.
“The oil price is currently defenceless,” wrote Jim Burkhard, S&P’s global head of crude oil research.
“Seasonal demand in the Northern Hemisphere summer may obscure the impact for a bit, but eventually there will be too much crude oil in the market absent a change in production trends.”
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The United States is expected to bear the brunt of the impacts from an oversupplied market, because U.S. shale production is more responsive to price shifts compared with other sources of non-OPEC supply, such as Canada, Guyana and Brazil.
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By the end of 2026, U.S. oil production could be down 640,000 barrels per day from what it was in mid-2025. However, such a decline could set the stage for a future price recovery, the analysis says.
Canada posted a $7.1-billion merchandise trade deficit in April – the largest on record – as exports fell sharply in the face of U.S. tariffs. The value of exports to the U.S. fell 15.7 per cent from the previous month, Statistics Canada reported. The decline was led by a sharp pullback in autos, consumer goods and crude oil exports.
Although April crude exports fell compared with the first three months of the year, analysts cautioned that the numbers need to be taken in context.
“If you look at trade with the U.S. in January, February, March, it was actually really quite high because there was this push to get as much out of the country and into the U.S. before the tariffs took effect,” said Susan Bell, the senior vice-president of downstream research with Rystad Energy.
And April is generally a low point in Canadian oil production, said Kevin Birn, S&P’s chief analyst for Canadian oil markets. That’s because it’s peak turnaround season, when companies lower production to perform necessary maintenance at their facilities.
The swing between production during turnaround and in winter is huge, he said – usually around 300,000 barrels.
“The volume will come back,” he said. “But we do anticipate, right now, a weaker price in the back end of the year.”
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That’s because of a range of factors, including OPEC pumping more oil into the market and a slip in demand associated with lower global economic growth. Together that will push the world into oversupply, Mr. Birn said, putting downward pressure on prices and the value of oil exports, including in Canada.
On the flipside, Rystad is forecasting a small price bump in the summer, Ms. Bell said. Even if OPEC does follow through on its planned production increase, Rystad believes the market has capacity to absorb the incremental barrels.
Regardless, Mr. Birn expects production will continue to grow in Western Canada, with export volumes to the U.S. hitting record levels even as prices slide.
That’s because oil sands companies are making their operations as efficient as possible, and because 90 per cent of the pipelines coming out of Western Canada still point south.
“The biggest consumer for Canadian crude – Canadian heavy sour, specifically – is the Midwest and then the Gulf Coast, because those refiners are configured to process Canadian heavy crude,” he said.
“They will continue to buy Canadian heavy crude, and Canada will continue to sell it to them.”