Market Overview and Predictions for Oil Stocks

In a tough forecast for oil investors, Scotiabank analyst Paul Cheng warns that the dual impact of the ongoing tariff war and the recent decisions by OPEC+ could severely drop global oil prices in the following months. Cheng predicts a possible low of $40 per barrel before any price recovery, with Brent crude averaging around $58 during the second quarter of 2025. Despite efforts to stabilize, he notes a significantly lowered price outlook for Canadian oil by about 15% over the next two years due to these global trends.

Cheng highlights that the challenging environment is compounded by years of underinvestment, but improvements in Canadian market access—led by the fully operational TMX pipeline—are expected to ease certain price pressures. By enhancing transport efficiency, he anticipates a stabilization of Canadian oil differentials and a consistent annual range of $11 to $15 for Western Canadian Select.

Strengthening of the Canadian Dollar

Meanwhile, BofA Securities' Howard Du notes a resurgence in Canadian dollar (CAD) strength, which gained momentum in March following unsuccessful attempts by the USD/CAD pair to break bullish. This shift towards a bullish CAD sentiment stems from a decline in the pressures of tariffs and anticipations of increased fiscal stimulus from Canada. Interestingly, Canada has evaded further tariff escalations from the U.S., maintaining a 7% effective tariff rate on exports.

However, ongoing trade uncertainties and disputes have adversely affected Canada's economy, prompting a cautious outlook among businesses as indicated in the latest Bank of Canada survey.

The 'Trump Put' in Bond Markets

Adding to the market dynamics, BofA's global economist, Claudio Irigoyan, reflects on what he terms the 'Trump put,' suggesting that current market conditions reveal bonds as a safer bet compared to stocks. He argues that tariffs are more of a negotiation tactic rather than a definitive end, with China representing a unique geopolitical challenge rather than a mere commercial dispute.

Looking ahead, Irigoyan believes that while a U.S. economic slowdown seems imminent, a significant recession is not expected in the near term. The backdrop of fiscal risks makes U.S. bonds attractive, especially as foreign appetite for dollar-denominated assets declines.

In Summary

As global market dynamics shift, investors must navigate a complex landscape involving oil prices, currency strength, and the evolving nature of bond markets. The emerging 'Trump put' in bonds signals a pivotal moment for asset management strategies, particularly amid fiscal uncertainties.