The price of a barrel of Canadian oilsands crude oil fell to its lowest level ever on Wednesday, at less than $10 a barrel.
Western Canadian Select was changing hands at $9.19 US per barrel, down $3.04 from Tuesday’s level. The U.S. benchmark known as West Texas Intermediate also fell to below $25 US a barrel, a level it has not hit since 2003.
Oil is being walloped by a supply shock and a demand shock at the same time right now, which is why the market for oilsands crude has fallen off a cliff.
Saudi Arabia and Russia have started a price war, flooding the market with cheap conventional oil.
Canadian oilsands oil always trades at a discount to lighter blends, such as Brent and WTI, because it is more difficult to transport and process. So, the oversupply of all types of oil has walloped the price of WCS.
Quarantines, shutdowns restrict energy demand
It’s taking a hit on the demand side, too, however, as the coronavirus has taken a huge bite out of demand for energy as quarantines and shutdowns drastically reduce the need for oil.
The oil swoon pushed the loonie below the 70-cent level on Wednesday, lower than it has been in years.
Stock markets are also swept up in the carnage, with the TSX and Dow Jones both down another five per cent on Wednesday. That comes on the heels of heavy selling for the past two weeks, which has pushed the price of both stock indexes down by about a third of their value in less than a month.
Governments around the world have rushed to bring in stimulus measures and bailouts for consumers and businesses, but it has so far not been enough to put a bottom under the price of oil, which is considered a risky asset at the best of times.
There are “green shoots of risk appetite emerging, and some further concerning aspects,” said Chris Weston of Pepperstone Group in a report. “I am not going to call a bottom in the risk story by any means.”