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Canadian Oil Prices Jump On Crucial Pipeline Breakthrough

Canada’s embattled energy industry has received some good news at last, which could narrow the gap between Western Canadian Select and West Texas Intermediate this week.

First, the federal government announced the resumption of work on the controversial Trans Mountain oil pipeline expansion. Despite continued opposition from British Columbia, Ottawa said the pipeline should be in service in 2022 at a daily capacity of 590,000 barrels.

The second piece of good news came for the Keystone XL pipeline, a project even more controversial than the Trans Mountain expansion. Last Friday, the project got the go-ahead from a Nebraska court, which approved the alternative route of the project after opponents disputed the original one.

Keystone XL is not out of the woods yet. A Montana judge has scheduled a hearing in early October for an environmental group that has requested a blocking of the permit President Trump granted to TC Energy (formerly Trans Canada) for Keystone XL.

Finally, TC Energy said it had reached an agreement with the Albertan government and natural gas producers in the province regarding the way it operates its Nova gas network, the largest in Canada’s oil heartland.

Western Canadian Select was trading lower at the end of last week but this week could see an improvement on the string of good news for both oil and gas. The positive effect of the news is particularly important now, after the Albertan government announced it would need to extend the production cuts imposed on the industry last December to the end of 2020 on the persistent pipeline capacity shortage.

The initial cuts totaled 325,000 bpd but this was later reduced as the prices for Canadian crude rebounded. Yet the capacity shortage remains due to delays in expansion and pipeline replacement projects, with excess production at about 150,000 bpd in total, including railway export capacity.

By Irina Slav for Oilprice.com

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