North American energy traders are reluctant to take up long-term positions on Canadian crude price moves, preferring to stick to spot deals, as uncertainty around government intervention in the market grows following delays to a critical pipeline project.
“Everything we heard from the government was that they were 100 percent relying on Line 3 coming into service at the end of 2019,” said Tim Pickering, president of Auspice Capital Advisors in Calgary, which manages a Canadian crude exchange-traded fund.Canada is the world’s fourth biggest oil producer and the heavy crude it produces is in high demand in the United States, where refiners are already facing a shortage due to sanctions on Venezuela and lower production from Mexico.
But buyers of Canadian crude in the U.S. Gulf Coast have held back from taking up positions to hedge their exposure or betting on Canadian prices for later in the year for fear of big losses if the government makes an unexpected move, sources said. Liquidity in the Canadian crude ETF that Auspice manages surged last October as Canadian crude’s discount to U.S. oil futures ballooned, attracting big U.S. market makers like Virtu Financial and Jane Street, Pickering said. That liquidity dropped off once the government stepped in.