Canadian Oil Patch Enters Trade War With Highest Prices in Years

(Bloomberg) — Canada’s oil patch is entering the trade war with the US backed by the strongest pricing for its crude in four years, giving it a cushion against any potential declines and threatening high costs for American refiners and drivers. 

Western Canadian Select ended Tuesday at $9.85 a barrel below West Texas Intermediate, the smallest discount since early April 2021, General Index prices compiled by Bloomberg show. Trump plans to announce tariffs on US trading partners later Wednesday and has already pledged a 10% duty on US imports of Canadian oil. 

The strong pricing, combined with the import tax, presents a challenge for US Midwest refineries that rely on Canadian oil for as much as 70% of the crude they process and have limited access to alternatives. The higher costs threaten to raise pump prices by 5 to 20 cents a gallon for regional drivers, according to GasBuddy.com.

Canadian heavy crude’s discount to WTI initially widened to more than $15 a barrel when the tariffs were announced, indicating that some of the costs would be borne by oil producers. Since then, the discount has narrowed as oil companies shipped as much crude as possible to the US ahead of the duties. That rush drained inventories in western Canada just as oil sands producers prepared to shut machinery for annual maintenance, curtailing production. 

Last week, US imports of Canadian oil rose to 4.42 million barrels a day, roughly tied with the record achieved in January, according to government data. Record shipments of oil also went to a Pacific marine terminal near Vancouver on the newly expanded Trans Mountain pipeline last month. 

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