Canadian Crude Price Boost Following TMX May be Short Lived.

Canadian crude discounts are expected to narrow sharply after the TMX pipeline expansion’s completion, but surging supply growth will erase the spare capacity within just a few years, Reuters said.

• When completed (target Q2), TMX will boost pipeline capacity by 590k b/d.
• Scarce pipeline capacity forces Canadian crude producers to sell barrels at heavy discounts.
• The expansion should shrink the West Canadian Select v WTI discount to $10-$12/b, compared to the current $19/b.
• Canada’s takeaway capacity will be around 5.2m bbl, leaving 0.22m b/d of spare pipeline capacity, BMO analyst Ben Pham said in a note.
• Yet, oil sands growth is high, with an additional 0.5m b/d potentially added in 2024 and 2025 alone, which would cause the bottleneck to reappear after just a few years.
• Sources told Reuters that TMX is likely the last pipeline Canada builds, with almost no prospect of additional project.