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Bloomberg
The worldwide coronavirus pandemic that’s caused oil demand to plummet has turned the Canadian oil patch’s biggest problem on its head. Rather than having too few oil pipelines, the province now has too many.
The collapse in oil demand caused by people staying home has reduced US demand for Canadian crude, leaving pipelines struggling to stay full. After more than a year of rationing space, Enbridge Inc announced it had additional space on its Mainline pipeline system for both heavy and light crude in April. TC Energy Corp also issued a call for crude on its Keystone pipeline running from Alberta to the US Midwest.
At the same time, the small price difference for crude from Canada makes it unprofitable to ship the country’s crude down pipelines to the US Midwest and Gulf Coast. Heavy Western Canadian Select oil is trading at a $13.00-a-barrel discount to West Texas Intermediate crude in Hardisty, Alberta. That’s compared with about $9.25 a barrel in Cushing, Oklahoma, according to NE2 Group data.
The situation is a significant change from just a month or two ago when Canadian producers were struggling to get their oil to US refineries as new pipelines, including the Trans Mountain expansion to the Pacific and Enbridge Line 3, met repeated delays.
The situation grew so severe in late 2018 that the Alberta government imposed production curtailments that remain
in place.