Sharp drop in global crude oil prices drags down Canadian energy stocks

Fears of a tariff-driven recession has led to a steep drop in the price of crude oil, walloping Canadian energy stocks and stoking worry about the sector’s outlook should the weakness persist.

West Texas Intermediate crude, the key U.S. benchmark, dropped as low as US$60.45 per barrel today, recovering some ground by early afternoon to hover around a four-year low of US$62.

The energy index on the TSX was down 8.5 per cent mid-afternoon on a day when the overall Canadian stock market was off about four per cent.

Mark Parsons, chief economist at ATB Financial, says if the crude price drop ends up being sustained, oilpatch companies may throttle back some of their spending plans for the year.

But Parsons says those companies are in a much better financial position than they were when oil prices cratered around 2015 and they’re also benefiting from a narrower discount on the heavy crude they produce.

This year’s Alberta budget is forecasting oil prices at US$68 per barrel and the provincial government says every US$1 drop in the WTI price during the fiscal year means a C$750 million hit to the provincial treasury.