Wednesday is shaping up to be a great day for Canadian oil producers, after Enbridge Inc. bought a 50 per cent stake in the Seaway crude oil pipeline from ConocoPhilliips Co. for $1.5-billion (U.S.). More than just a deal to boost Enbridge's existing pipeline footprint, the move could have a substantial impact on the price of oil shipped by Canadian producers.
The deal comes as the oil storage hub in Cushing, Oklahoma experiences a glut of oil, which has been blamed for depressing the price of West Texas Intermediate oil relative to other oil benchmarks, including Brent crude. In buying a stake in the Seaway pipeline, Enbridge hopes to reverse the flow of oil from the Cushing hub and redirect it to Houston, potentially raising the price of WTI oil.
Redirection could be months away, but already the Enbridge deal is having the desired effect on WTI: The price surged above $101 a barrel on Wednesday, hitting its highest level since June, despite the backdrop of an uncertain global economy. Canadian oil producers have also benefited. Canadian Oil Sands Ltd. rose 1.9 per cent, Canadian Natural Resources Ltd. rose 3.8 per cent and Suncor Energy Inc. rose 1.5 per cent in mid-morning trading on Wednesday.
As my colleague Shawn McCarthy reports: "Cushing has become a key choke point for Canadian crude producers, as a glut of supply there has driven down the price of West Texas Intermediate, the benchmark against Canadian oil is priced. TransCanada Corp.'s Keystone pipeline added to that glut when it commenced delivery into Cushing earlier this year, while the controversial Keystone XL line is designed to help alleviate it by extending the pipeline network to the Gulf Coast, home of the world's largest refining complex."