In the two weeks since an oil price war broke out between Russia and Saudi Arabia, crude prices have plunged to their lowest levels in years, hammering Canada's oilpatch all the way down.
But for all the financial strain inflicted so far by the dispute, experts say there are still months yet to come and, while there may be no winners, it could produce many losers.
"In principle, I don't think anyone can win this war," said Ayham Kamel, head of Eurasia Group's Middle East and North Africa research team.
"It might not be even the Russians or the Saudis that lose this war. It could be U.S. and North American oil producers that suffer the most pain."
"This ultimately is akin to two bald men fighting over a comb," said Bill Farren-Price, a director with RS Energy Group in London, now part of Enverus.
"This is the worst possible time to have price war in the midst of a demand-side shock, which is what we're seeing from coronavirus."
A fight over market share
Saudi Arabia, the de facto leader of OPEC, and Russia became locked in a war for global oil market share after their three-year deal to restrain output collapsed in early March.
With global oil demand falling because of the coronavirus pandemic, OPEC wanted to deepen supply cuts but Moscow said it would agree only to an extension to the existing pact.
The kingdom has since vowed to increase production to a record 12.3 million barrels per day, and has chartered numerous tankers to ship oil around the world.
While Russia had agreed to restrain output in recent years, analysts say it had grown frustrated that propping up prices was helping shale oil production in the United States. Lower prices, meanwhile, could drive out high-cost producers.
"I think Russia found an opportunity to balance the market in different ways," Kamel said.
Saudi Arabia's aggressive plan to open its taps is viewed as one aimed at pushing Russia back to the negotiating table, but observers caution it won't be easy to get Russian President Vladimir Putin to blink first.
Both sides gird for a long fight
On Friday, the price of West Texas Intermediate (WTI), the North American benchmark, closed at $22.53 US a barrel — capping a remarkable 29-per-cent drop for the week. Brent crude, the global yardstick, fell 20 per cent in the week to close at $26.98 US a barrel.
Such low prices will put a strain on Russia and Saudi Arabia.
According to Bloomberg News, the Russian government's budget breaks even at a price of $42 US a barrel. Moscow has said, however, it could withstand prices of $25-$30 US per barrel up to 10 years.
Farren-Price said the general view is Saudi Arabia's budget requires a Brent price closer to $80 US a barrel, though reports say Riyadh could afford oil at $30 US but would have to sell more crude to soften the hit to its revenues.
Though both countries face budget deficits, each country also has war chests of around $500 billion to weather economic shocks, according to Reuters.
While Russia's advantage may be that its economy is more diversified, Saudi Arabia has the capacity to put a lot more oil onto the market. But everyone hurts at these prices, Farren-Price said.
"That said, I don't see any prospect that Saudi Arabia will step back from what is a pretty strong position that it's laid out. And I don't see the Russians coming back to the table with a tail between their legs."
He thinks movement is unlikely, at least in the next three to six months.
Canadian operators feel the strain
Few observers appear to expect a quick resolution to the price war.
Rather than wait things out, U.S. officials said Friday the Trump administration plans to send a special energy envoy to Saudi Arabia to work with the kingdom on stabilizing the global oil market.
Kamel thinks it's going to take more economic pain and revenue loss to get Russia or Saudi Arabia to move. He thinks it could take up to a year and a half for the process to take place and for new balances in the market to emerge.
But things are happening fast in North America.
Energy economist Peter Tertzakian told CBC News this month Canada's oil sector begins to feel financial strain when WTI prices fall below $40 US a barrel, though it varies by company.
The price slump has been devastating to U.S. oil producers, too, some of which have begun putting employees on furlough. Even Texas is weighing curtailment for the first time in decades, according to The Wall Street Journal.
With the pandemic choking economic activity and oil supply increasing, the world is looking at the "possible buildup of the most extreme global oil supply surplus ever recorded," IHS Markit said in a report last week.
Kamel said Canadian oil production isn't the target of the price war but he expects it will be a casualty during the dispute.
"I think you end up with both the American producers and Canadian producers suffering, or ... forced to cut production given their high costs," he said. "High-cost producers … will find it very difficult to deal with this current environment."
He said it's not yet clear how difficult things could get for Canada's oil sector, adding governments can provide support. It's been reported Ottawa is to reveal its strategy for helping the sector shortly.
"But they cannot do it indefinitely," Kamel said. "Until it becomes clear where the global economy is moving toward in 2020, it won't be clear to us how bad the damage is."