Canada’s oilpatch executives replace tariff anxiety with fear of slowdown in energy demand

Crude prices plunge Thursday amid mounting concern about a broader slowdown in consumption

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Published Apr 03, 2025  •  Last updated 0 minutes ago  •  2 minute read

Oil futures were down more than seven per cent a barrel Thursday morning as markets were hammered in the aftermath of Donald Trump's reciprocal tariff announcement. Photo by Luke Sharrett /Bloomberg

Fears over slowing demand for oil and gas are likely to replace tariff anxieties in the boardrooms of the Canadian oilpatch following United States President Donald Trump’s latest trade move.

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His administration’s latest sweeping tariffs on global trading partners exclude crude oil, natural gas and refined products, and Canadian goods, including energy, that are compliant with the Canada-United States-Mexico Agreement (CUSMA) will continue to move free of tariffs across the border.

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Nevertheless, oil prices plunged on Thursday amid mounting concern about a broader slowdown in consumption and unexpected news from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) that they are speeding up plans to hike output.

West Texas Intermediate (WTI) futures were down more than seven per cent a barrel Thursday morning.

“The market is getting hammered, risk sentiment is getting hammered; that’s going to have negative consequences for crude prices, for crack spreads for the whole complex,” oil analyst Rory Johnston, founder of Commodity Context, said. “This is absolutely a negative economic shock, so it’s absolutely a negative demand shock for crude oil.”

One silver lining for the Canadian sector so far this year has been the narrowing discount on Canadian crude and that continued on Thursday, with the Western Canadian Select (WCS) differential to WTI dipping to around US$9 per barrel, its lowest since September 2020, according to Bloomberg News.

In the past, Canadian crude exporters have not bothered to ship under CUSMA rules due to the administrative burden and cost of meeting certification-of-origin requirements, but that has changed.

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Producers have been scrambling to ensure their barrels are CUSMA-compliant to avoid Trump’s previously announced 10 per cent tariff on energy.

Canadian oil majors that have confirmed that their production is CUSMA-compliant include Canadian Natural Resources Ltd., Suncor Energy Inc., Imperial Oil Ltd., Cenovus Energy Inc., Meg Energy Corp., Tourmaline Oil Corp. and Athabasca Oil Corp., according to an RBC Capital Markets survey released Wednesday.

However, U.S. tariffs on steel and aluminum remain in place and Canada’s retaliatory levies on steel products and other goods have been particularly difficult for oilfield service companies who have seen their operational and production costs rise.

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But there was still relief in the sector this week that Canada seems to have escaped the worst of Trump’s reciprocal tariffs.

“We’re going to do our best to kind of move through this period of uncertainty,” Canadian Association of Energy Contractors chief executive Mark Scholz said. “It looks as though the Americans have really started to realize how important this relationship is and have carved us really out of the brunt of what other countries are experiencing right now.”

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