Canada recorded a record trade deficit in December 2018, almost entirely due to declining energy exports as a result of falling crude oil prices and decade-low Canadian oil prices, Statistics Canada said on Wednesday.
Canada’s exports dropped by 3.8 percent in December, while imports rose by 1.6 percent, due to higher imports of energy products. As a result, Canada’s trade deficit with the world widened to a record US$3.44 billion (C$4.6 billion) in December from US$1.5 billion (C$2.0 billion) in November.
Excluding energy products, Canada’s exports were essentially unchanged in December. Since July, Canadian exports have dropped by 9.8 percent, and energy products were responsible for 80 percent of that decline, Statistics Canada said.
Canadian exports of energy products slumped by 21.7 percent in December, to the lowest level since July 2016. Crude oil exports plunged by 28.7 percent to US$2.5 billion (C$3.3 billion), down by more than half since peaking in July 2018, according to Statistics Canada.
As Canadian oil production was growing last year, takeaway capacity constraints and maintenance at U.S. refineries in the fall of 2018 drove down the price of Western Canadian Select (WCS)—the benchmark price of oil from Canada’s oil sands—to as low as US$14 a barrel in October and November, with its discount to WTI at around US$50 a barrel.
In early December, the Alberta government moved in to shore up the price of Canadian heavy oil and in the most drastic measure yet, the province of Alberta mandated an oil production cut of 325,000 bpd beginning in January 2019.
Alberta eased some of the cuts last week, saying that April oil production would be up by 100,000 bpd compared to the initial limit set for January.
In recent weeks, the discount of WCS to WTI has been below US$15 a barrel, compared to more than a US$40 differential in the fall of 2018.