Pre-Tariff Rush Pushes Canadian Crude to Strongest in Four Years

The Canadian oil industry is experiencing a surge in activity as producers rush to capitalize on the potential imposition of tariffs on Canadian oil exports to the U.S. The proposed 10% tariff, announced by President Donald Trump, has created a sense of urgency among Canadian oil producers, leading to a significant increase in crude oil prices. This pre-tariff rush has pushed Canadian crude to its strongest position in four years, with prices reaching levels not seen since 2021.

The completion of the Trans Mountain Pipeline (TMP) expansion, which adds nearly 600,000 barrels per day in takeaway capacity, has been a major factor in the recent strength of Canadian crude oil prices. The TMP expansion has allowed Canadian oil to more efficiently reach the U.S. and new international markets, tightening the discount for Canadian crude prices and providing a boost to resource revenues. Additionally, the restart of the Terra Nova oil field in Newfoundland and Labrador has added to national oil production growth, further supporting the strength of Canadian crude oil prices.



The robust capital expenditure intentions for 2024 have also contributed to the current strength of Canadian crude oil prices. Canadian oil production is expected to grow by 300–500,000 barrels per day in 2024, making Canada the largest source of global oil supply growth, accounting for 25–67% of incremental supply in 2024. This growth is projected to further tighten the discount for Canadian crude prices and provide a boost to resource revenues.

However, the proposed 10% tariff on Canadian oil imports by the U.S. could disrupt the current strength of Canadian crude oil prices. The tariff would increase costs for U.S. refiners, which could erode margins and get passed on to consumers in the form of higher gasoline and diesel prices. This could lead to a shift in crude flows, with a portion of U.S. imports being redirected to overseas markets, as higher prices would push some Canadian crude into Asia rather than California.

Furthermore, the potential for retaliatory tariffs by Canada could raise the prices of inputs and drilling rig equipment imported from the U.S., which could impact the Canadian oil industry. This could lead to job losses in a sector that still has not recovered to where it was a decade ago. Last year, total employment in Canada's drilling sector was approximately half what it was in 2014, and the CAOEC's November 2024 forecast had projected 2025 would see the sector's highest level of employment in ten years, but this is now in doubt.



In summary, the current strength of Canadian crude oil prices is driven by the completion of the TMP expansion, the restart of the Terra Nova oil field, and robust capital expenditure intentions. However, these factors could be impacted by geopolitical tensions and regulatory changes, such as the proposed tariffs on Canadian oil imports by the U.S. and the potential for retaliatory tariffs by Canada. The pre-tariff rush has pushed Canadian crude to its strongest position in four years, but the future of the industry remains uncertain in the face of potential tariffs and retaliatory measures.