(Bloomberg) – Canadian crude prices on the U.S. Gulf Coast collapsed after President Donald Trump announced that Venezuela would relinquish as much as 50 million barrels of oil to the U.S. that would be sold at market prices.
Image: Petroleum Economist and World Oil
Canadian Cold Lake crude, a grade that is similar to Venezuelan heavy oil, traded on Wednesday at a discount to a monthly average of the U.S. benchmark West Texas Intermediate of $8.50 a barrel versus $6.80 on Tuesday, according to Modern Commodities prices. If the discount closes the day near this level, it would be the largest since late 2023, according to Link Data Services.
As the U.S. attack on Venezuela last week stunned the global political order, the biggest market impact for oil so far has been in Canada. Oil from the Alberta oil sands is similar to the heavy, high-sulfur crude produced in Venezuela. Increased supplies from the South American nation would create more competition for crude being sold to U.S. refiners.
Canada, the largest producer of heavy crude in the world, has benefited the most from the decline of Venezuelan output in recent years. While about 70% of the country’s oil exports go to refineries in the U.S. Midwest, pipeline expansions to the Gulf Coast over the past couple decades allowed refiners there to supplant lost volumes from South America.
See also: U.S. to oversee Venezuelan crude sales under new strategy
The U.S. began marketing Venezuelan crude globally, a move that could make it one of the most powerful oil traders in the world, the Energy Department said. State-run Petroleos de Venezuela SA is negotiating with the U.S. on selling oil volumes under commercial relations between the two countries, according to a Wednesday statement.
Venezuela would relinquish supplies, valued at about $2.8 billion at current market prices, and the cargoes would be sold with proceeds benefiting both countries, Trump said in a social media post late Tuesday. The administration plans to control future sales of oil from Venezuela and use proceeds to rebuild the South American nation’s economy, said Energy Secretary Chris Wright.
Shares of large oil sands producers fell Wednesday. Cenovus Energy Inc. was down 3.3%. Shares of Suncor Energy Inc., which produces more light crude, were down 0.9%.
In Alberta, Western Canadian Select, the Canadian heavy crude benchmark, traded Wednesday at a discount to WTI of $14.45 a barrel versus $13.90 on Tuesday.
WTI was trading at $55.95 in New York at 1:44 p.m. on Wednesday.
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