For decades, the United States has been Canada’s most important energy partner, absorbing the lion’s share of its oil and gas production. After meeting its domestic refining needs, Canada exports ~80% of its crude output, with roughly 90% going to the U.S. thanks to integrated oil infrastructure built over more than 70 years.
In 2024, Canada exported crude oil, NGLs and natural gas worth $160 billion, with Canadian oil accounting for more than 60% of U.S. crude imports. In 2025, Canada exported a record 4.3 million bpd of crude, with 3.9 million bpd, or just over 90%, going to the U.S., according to the Canada Energy Regulator. That trade has strengthened further this year: U.S. imports of Canadian crude averaged just over 4 million bpd during the first half of 2026, while total Canadian crude exports in June were 6.4% higher than a year earlier.
The latest round of U.S.-Canada tariffs has done little to loosen those ties in oil. Canadian heavy crude has become harder for U.S. Gulf Coast refiners to replace as Mexican production declines, Venezuelan supply is rising but still somewhat uncertain and the Iran war complicates shipments of competing Middle Eastern grades. The surge in Permian production offers only a partial substitute because much of it is lighter than the crude many Gulf Coast refineries were designed to process.
Enbridge’s Houston Oil Terminal, which began operations in July, gives Canada considerably more access to that market. EHOT gives Canadian heavy crude access to U.S. Gulf Coast refineries and export docks, opening another outlet for oil sands production as refiners look for heavy barrels outside the Middle East.
"The refinery cluster in the U.S. Gulf Coast boasts the greatest concentration of heavy, sour crude processing capacity anywhere in the world. Many of these facilities were designed to run heavy grades from Venezuela and Mexico, making them a natural fit for Canadian barrels," said Joe Calnan, VP of energy at the Canadian Global Affairs Institute.
The Midwest remains by far the largest U.S. market for Canadian crude, taking an average 2.75 million bpd in 2025 and roughly 2.92 million bpd during the first half of 2026. The Gulf Coast is a much smaller market for Canadian barrels despite being the country’s largest refining center and home to many of the complex refineries capable of processing heavy, sour crude. Canadian crude processed in PADD 3 averaged 416,000 bpd in 2025 and fell to roughly 337,000 bpd (based on EIA January- June data) during the first half of 2026, down from 526,000 bpd in 2024. EHOT is designed to push more Canadian heavy crude into that market, with Enbridge planning to expand the terminal’s storage capacity from 2.5 million barrels to 15 million barrels.
Canada is also expanding in another direction, simultaneously.
Canada is also adding capacity on its Pacific route. The Trans Mountain expansion nearly tripled pipeline capacity to 890,000 bpd when it entered service in Q2, and the system hit full capacity for the first time in June. Trans Mountain now plans to add another 90,000 bpd in the fourth quarter and 210,000 bpd by the end of 2028, with most of that additional crude expected to head to Asia, according to Reuters.
Oil has so far been kept outside the escalating U.S.-Canada trade fight. Canada imposed retaliatory tariffs of 15%, 25% and 50% on C$27.6 billion of U.S. goods on Tuesday, matching U.S. tariffs on the same value of Canadian imports. The new Canadian duties target products including steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. The White House has explicitly exempted energy, potash and critical minerals from its 50% Section 338 tariffs, leaving the cross-border oil trade untouched.
Oil has so far been kept outside the escalating U.S.-Canada trade fight.
Canadian retaliatory tariffs of 15%, 25% and 50% on C$27.6 billion of U.S. goods took effect Tuesday after Ottawa pledged to match the U.S. Section 338 tariffs dollar for dollar. The Canadian tariffs target products including steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. The White House explicitly excluded energy and potash from its 50% Section 338 tariffs, along with critical minerals and certain other goods, leaving Canadian crude outside this round of tariffs.
By Alex Kimani for Oilprice.com
