Benchmark oil price slides to lowest level since 2021

The price of the benchmark North American crude blend known as West Texas Intermediate, or WTI, slid to a four-year low on Tuesday, dipping to $55 US a barrel after starting the year off around $80.

Oil prices have been on a downward trend since the start of the year, and agencies expect that pressure to continue as global oil inventories continue to rise in 2026. Projections vary, but others see prices headed even lower in 2027. 

Drops in oil prices are of particular concern in Canada, and especially Alberta, given how much oil and gas royalties figure into the financial health of governments.

Rory Johnston, energy researcher and founder of the Commodity Context newsletter, says the latest slide in prices is the continuation of a trend that began months ago, driven by a combination of weakening global growth expectations and a surge in supply.

“Demand has actually performed relatively well, funny enough, but there's just so much supply in the market that prices are going to need to continue grinding lower until we see supply cut somewhere in the world,” he said.

Johnston said the market turned decisively earlier this year when U.S. trade policy announcements hurt global demand assumptions, followed almost immediately by OPEC+ accelerating production increases.

The consequences for Western Canada are unavoidable, Johnston said.

“Lower prices are bad for Western Canadian producers. There’s no two ways about it,” he said. 

But unlike in past years, the price gap between WTI and the Canadian price of oil, Western Canadian Select (WCS), remains relatively stable. Johnston said we're seeing a gap of $11 to $13, rather than $50 a barrel.

“So even in that scenario, where we truly see a fall off in prices, it seems unlikely that Canada is going to feel acute additional pain, relative to the rest of the market,” he said. 

“We’re just going to experience the same pain as every other producer in the world.”

Charles St-Arnaud, chief economist at Servus Credit Union, noted Alberta's sensitivity to oil prices means even modest declines can have large fiscal consequences.

But that impact is partially offset by narrower oil price differentials since the Trans Mountain expansion came online, he said.

“We've seen that differential being much narrower than what the government was expecting,” he said.