As the effective date of tariffs continues to be postponed, concerns about US President Donald Trump's threat to impose tariffs on Canadian oil are weakening, driving up Canadian crude oil prices.
Data shows that on Monday, the price of Canadian Western Select crude oil for delivery in April was $11.50 per barrel lower than the US benchmark WTI crude oil. This is the smallest discount since Trump first threatened tariffs on Canadian imports on November 15th last year.
Canadian oil industry's concerns about tariffs weaken
US Secretary of Energy Chris Wright stated on Monday that it is possible to reach an agreement and lift the tariffs imposed by the US on Canada and Mexico, further reinforcing people's view that tariffs will not affect Canadian crude oil. These tariffs were originally scheduled to take effect on February 4th, including a 10% tariff on Canadian energy and a 25% tariff on other products imported from Canada and Mexico. These tariffs were initially postponed for a month, and then postponed again last week.
Rystad Energy analyst Susan Bell said, "I feel like we're in a strange world. Considering the level of market volatility when tariffs are implemented, the market is underestimating the risk of tariffs. Trump is taking the risk of taking extremely unpopular economic measures
In January of this year, due to Trump's reiterated plan to impose tariffs on US neighbors, the discount on Canadian heavy crude oil soared to $15.50. Subsequently, as tariffs were postponed, discounts gradually narrowed. In addition, Canadian oil exports to the Gulf Coast will not be subject to tariffs, and some oil sands facilities will begin maintenance in April, reducing production and boosting oil prices.
The oil demand in the United States in April will be stronger than in March. Bell said that the cross mountain oil pipeline that allows Canadian producers to transport oil to markets outside the United States may operate at full capacity, which will pump Canadian heavy crude oil out of the Midwest United States. She also mentioned that the discount on selected crude oil from Western Canada in April reflects the tightening of heavy crude oil supply.
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