An oil pumpjack near Longview, Alberta. (James MacDonald/Bloomberg News)
Concern about U.S. President Donald Trump’s threats to impose tariffs on U.S. imports of Canadian oil is waning as the duties’ start date keeps getting pushed back, strengthening local crude prices.
Heavy Western Canadian Select for delivery in April was trading at $11.70 less per barrel than U.S. benchmark West Texas Intermediate on March 10, according to people familiar with prices. That’s the narrowest discount since Nov. 15, before Trump — then president-elect — first threatened tariffs on Canadian imports.
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Adding to speculation the tariffs won’t affect Canadian crude, U.S. Energy Secretary Chris Wright said March 10 that a scenario where an agreement is reached and U.S. tariffs on Canada and Mexico are pulled back is possible. The tariffs, including 10% on Canadian energy imports and 25% on everything else from Canada and Mexico, were scheduled to go into force Feb. 4. They were first delayed by a month and then delayed again last week, albeit only on items covered by the North American trade agreement known as USMCA.
“I feel like we are in bizarro world,” said Susan Bell, a Rystad Energy analyst. “The tariff risk is being discounted by the market — given how negative the market moved when the tariffs were put in place. Trump is risking a deeply unpopular move on the economy.”
Canadian heavy crude’s discount jumped to as wide as $15.50 in January as Trump reiterated plans to impose the duties on America’s closest neighbors. Since then, the discount has gradually narrowed as the tariffs were delayed. Also helping the price, the executive order indicates tariffs won’t apply to Canadian oil exported off the Gulf Coast, and some oil sands facilities are set to start maintenance in April, reducing output.
Oil demand in the U.S. will be stronger in April than in March, and the Trans Mountain pipeline, which lets Canadian producers ship to non-U.S. markets, is probably going to be full, pulling Canadian heavy oil crude out of the U.S. Midwest, Bell said. The April discount for WCS reflects “tighter heavy balance but no discount to accommodate the tariff,” she said.
