Canadian oil prices are now just $US18 below the price of U.S. crude thanks to a series of new U.S. pipelines, the Wall Street Journal reported this morning.
This means the Keystone XL Pipeline is already obsolete.
“Higher oil prices in Canada … are a sign that oil-sands crude is finding its way to the U.S. even without the approval of the controversial Keystone XL pipeline,” Journal reporters Nicole Friedman and Chester Dawson said. “The resurgence in Canadian oil prices and energy stocks is further confirmation that the transportation problems that have prevented both Canada and the U.S. from enjoying the full benefits of the energy boom are easing.”
Until recently, crude from Canada’s booming tar sands was getting trapped in the Midwest and preventing it from getting to the Gulf, where it could be exported at market prices.
But in January, engineers switched on the Seaway Pipeline, which connects the major crude delivery hub in Cushing, Okla., with Gulf refineries. And rail now transports 550,000 barrels of Canadian crude, when five years ago barely 1,000 barrels were processed.
As a result, the price of Canadian oil has since risen to $US80.67 a barrel as of Tuesday, about $US18 below WTI. In November the gap was as large as $US40.
“It’s not a necessity today,” Chris Theal, president of Kootenay Capital Management in Calgary, told BI. If current growth rates continue, he said, something like the Keystone may be needed. But Canada has gotten the hint from the Obama Administration, which has shown little interest in expediting the approval process, and begun considering new pipelines. Two would take Alberta crude to Canada’s west coast, another to New Brunswick on its eastern shore.
Analysts say that spread satisfies market conditions, and leaves Canadian producers in good shape.
“This is truly the best time for Canadian oil-and-gas companies…in at least three or four years,” Eric Nuttall, a portfolio manager in Canada, told the Journal.
A Senate initiative to override the executive branch is still finding footing — but existing statutes seem to say both the executive and legislature possess authority to regulate something like Keystone, and the bill would likely end up in court. President Obama has shown no inclination to pressure the State Department to expedite its review of the pipeline.
“We have been of the opinion for nearly a year now that Keystone XL is dead,” oil analyst Stephen Schork wrote this morning.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.