Canadian Oil Producers to “Bear Brunt” of U.S. Energy Tariff
Canadian oil producers including giants like Enbridge (ENB), Suncor Energy (SU) and Cenovus Energy (CVE) are likely to bear the brunt of tariffs imposed on energy imports by the White House over the weekend.
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President Donald Trump made good on his threat to slap 25% tariffs on imports from Canada and Mexico, while energy resources from Canada will be subject to a10% tariff.
Oil prices rose after the announcement but a retaliatory trade war could ultimately depress global economic output, weakening demand and lead to lower prices. Additionally, the 10% tariff on goods sent from China, the world’s largest crude importer, may have negative consequences for oil prices.
In the near-term, the 10% tariff on energy exports will likely lead to a discount on Canadian crude that will impact producers of all sizes.
Goldman Sachs analysts said in a note Sunday that Canadian oil producers will likely take a hit with a $3-4 additional discount on Canadian crude versus U.S. crude as they have limited other export channels to redirect flows.
Canadian Oil Imports Hit Record Last Year
Following the expansion of Canada’s Trans Mountain pipeline, U.S. imports of Canadian crude oil reached a record 4.3 million barrels per day (bpd) in July 2024, about a quarter of U.S. refinery inputs.
Canada made up 62% of U.S. oil imports in the first 10 months of 2024, with around 80% of Canadian crude production flowing south. Enbridge’s 3 million bpd Mainline system, which flows into Chicago, is the single biggest conduit for Canadian crude into the U.S.
“Canadian oil producers are expected to eventually bear most of the burden of the tariff with a $3 to $4 a barrel wider-than-normal discount on Canadian crude given limited alternative export markets, with U.S. consumers of refined products bearing the remaining $2 to $3 a barrel burden,” said the Goldman analysts.
Shares in CVE were down approximately 0.7% in pre-market trading on Monday ahead of the open on Wall Street, having fallen 2.89% on Friday as markets prepared for the tariffs. SU stock slipped 2.5% in Toronto on Friday, while Imperial Oil (IMO) fell 6.59%.
Other large Canadian oil producers in the sector include Canadian Natural Resources (CNQ) and TC Energy (TRP).
What are the Best Canadian Oil Stocks?
For investors interested in investing in Canadian energy stocks, we have rounded up the best stocks that analysts are bullish about using the TipRanks Stocks Comparison tool.