Tariff delays, but uncertainty remains
Though the new US administration’s tariffs against Mexico and Canada have been delayed for at least 30 days, the potential 10 percent tariff on Canadian energy imports could prove to be the most significant for the energy industry.
Over 60 percent of the US’ crude oil import needs are met with Canadian barrels, and about 65 percent of PADD 2 crude runs are of Canadian oil – a volume not replaceable with domestically produced barrels.
Market reaction: rising prices and spreads
Analysts and traders closely track the Western Canadian (WCS) differential, which widened to $-15.50 Friday, before narrowing to $-13.50 with the onset of tariffs, then return to $-13.90 after threat of tariffs were delayed.
Competitive US grades were impacted as well: Mars vs. ICE HOU turning positive on Monday before returning to a more normal $-0.37 level on Tuesday, and HLS vs. ICE HOU widening to $2.00 before falling back to $1.42 on Tuesday – a still elevated level compared to last week’s average.
Impact of TMX and key market signals
Despite complications of loading crude at Westridge after the startup of TMX, heavy crude discounts have remained more stable than history at Hardisty. The real sign of tariff impact will likely be most evident in the Cold Lake at Patoka spread.
After TMX startup the spread has trended narrower, but Monday’s price move was a narrowing more significant than would otherwise be expected.
