Oil forecasts slashed amid fear of ‘impending global economic slowdown’ #CanadaFinance

Oil price forecasts are tumbling as analysts hike their bets on weaker demand in the remainder of 2025 linked to U.S. trade tariffs, and a prevailing climate of economic uncertainty.

U.S. benchmark West Texas Intermediate (WTI) (CL=F) hit a recent peak above US$80 in mid-January, days before U.S. President Donald Trump took office for his second term. Since then, prices have fallen into the US$60-range, hovering near four-year lows.

Morningstar DBRS analyst Andrew O’Conor says this is mainly because the United States and China — the two main adversaries in the ongoing trade war — are also the world’s largest oil consumers. Morningstar notes the two nations accounted for a combined 36 per cent of global demand in 2024.

On Thursday, Trump said his administration is in talks with Chinese officials to de-escalate steep tariffs between the two nations. Beijing has denied that negotiations on a deal are underway.

Oil’s price decline has also been hastened by OPEC+ producers announcing a plan in March to unwind voluntary production cuts beginning in April.

Morningstar DBRS cut its full-year WTI forecast for 2025 to US$60 per barrel from US$65 per barrel, with no change for both 2026 and 2027. The firm also shaved US$5 per barrel off its price forecast for Western Canadian Select, the main blend of heavy crude from Canada’s oilsands.

“The impending global economic slowdown — largely centred on the U.S. and China — will potentially have a significant negative effect on crude oil demand,” O’Conor wrote in a recently published report.

“Further downside to pricing will depend on the magnitude and duration of a global economic slowdown, which now appears underway, and how quickly non-OPEC+ oil producers cut output in response to lower prices.”

Deloitte’s latest oil and gas price report calls for WTI to average US$68 per barrel in 2025, US$66 in 2026, and US$65 in 2027. In December, it forecast US$70 in 2025, and US$68 in 2026 and 2027.

“The largest potential risk to the oil and gas industry appears to be what generally happens to the entire United States and Canadian economies from tariffs,” wrote Andrew Botterill, a partner with Deloitte.

“Oil demand could be stressed by an economic slowdown coupled with increasing energy costs, ultimately also softening the demand for Canadian oil exports, and impairing the entire energy market.”

Earlier this month, Goldman Sachs warned benchmark oil prices could sink to the US$50 range by year-end if trade barriers bring about a recession.

Canada’s largest oil producers are due to begin reporting first-quarter 2025 financial results next week. Imperial Oil (IMO.TO)(IMO) is scheduled to release its latest earnings before the opening bell on May 2.