Worst day for oil since 2015 as WTI price falls to $50 US a barrel

The price of a barrel of the most common blend of U.S. oil fell to its lowest level in more than a year, as fears of a global supply glut came roaring back to life.

A barrel of West Texas Intermediate was going for $50.39 US a barrel, down by $4.24 on the day. WTI hasn't traded that low since September 2017.

That's a decline of 7.76 per cent, which if it holds to the end of the day would be the worst day for oil in percentage terms since February 2015.

The price of oil has plunged 20 per cent since the start of the month as supply is growing much faster than demand, which is slowing in part because of the ongoing trade war between the U.S. and China.

"The market is pricing in an economic slowdown — they are anticipating that the Chinese trade talks are not going to go well," said Phil Flynn, an analyst at Price Futures Group in Chicago, referring to high-level trade talks next week between U.S. President Donald Trump and his Chinese counterpart Xi Jinping at the G20 summit in Buenos Aires.

Jeff Kravetz, regional investment director at U.S. Bank Private Wealth Management, said the Sino-American meeting could be key to buoying all sorts of markets, from oil to stocks and bonds.

"If you can get President Trump and President Xi to even just come closer with their rhetoric and make a bit of progress on the trade front that could be the catalyst for markets to move higher," he said.

The Organization of Petroleum Exporting Countries or OPEC plans to meet on Dec. 6, where the cartel is widely expected to move to curb its supply to prop up prices. OPEC leader Saudi Arabia is expected to pressure the group to agree to a cut of 1.4 million barrels per day.

"But the market doesn't believe that OPEC is going to be able to act swiftly enough to offset the coming slowdown in demand," Flynn said.

The blend of oil from Canada's oilsands was faring even worse than WTI was on Friday, with Western Canada Select off by $4.04 to $14.67 a barrel, late in the trading day. That's a decline of 20 per cent from Wednesday's level. Bloomberg doesn't have trading data on WCS for Thursday because of the U.S. Thanksgiving holiday that day.

It's also perilously close to the lowest level on record for that type of crude, which has been waylaid both by the global oil glut but also a lack of pipeline and rail capacity to get it to refineries outside Alberta.

The pipeline problem has become so acute that even other Canadian oil blends, such Edmonton Mixed Sweet and Synthetic Crude, also trading at discounts of more than $30 to WTI, despite being chemically similar, economists at TD Bank said in a report on Monday.

While the bank expects Canadian oil prices to rebound back to more normal levels soon, the outlook is very much unclear.

"The path to a more normal price situation is not set in stone," the bank said, "far from it."