Oil: Little impact on CAD of keystone XL pipeline - Rabobank

Christian Lawrence, Senior Market Strategist at Rabobank, suggests that their oil forecasts remain unchanged with the 50-60 region likely to dominate trading in 2017.

Key Quotes

“It is worth noting that President Trump signed executive orders on the 24th that revives the Keystone XL pipeline. We see little impact on CAD from this given that:

1) We knew this was going to happen as soon as Trump was elected. If I recall correctly he first pledged to support Keystone XL back in mid-2015.

2) WCS-WTI spread has been far more stable over the past 18mths and there is not so much of a bottle neck in terms of supply anymore. Alternative routes have been found. We might see some tightening of spreads in longer dated contracts but spot oil prices haven’t reacted much and neither has CAD.

3) Trump’s signature could be read as a sign that trade relations between Canada and the US might not be that strained going forward. That said, we still think CAD isn’t pricing in enough risk of trade disruptions - with over 75% of exports heading to the US any change in trade could weigh.

4) Keystone is going to have limited near-term impact on Canadian growth. The construction boost is almost all on US soil and the impact in terms of oil will take longer to emerge (construction unlikely to be finished until late 2018). The bias in Canada remains skewed to a weaker macro environment and an easing bias.”