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Russell: Trump's unintended consequences of Canada's crude oil transfer to China are a lesson for him.

If there's a law of unintended effects, a good example would be how the commodity markets have adjusted to the reality and perceived threat of the tariff war started by U.S. president Donald Trump.

Trump's trade measures and tariffs have forced commodity producers, buyers, and traders to rethink long-established relations, adapt to new realities, and predict what could happen.

It is clear that the commodity markets are adapting not only to the actual measures taken by the Trump Administration, but also the potential future actions. This has led to a desire to reduce exposure to the United States.

One example is the seaborne crude oil exports from Canada that have shifted from the United States to China even though Trump has backed off his original plan to impose 10% tariffs on energy imports.

The first time in history, Canada exported more crude oil by sea to China than to the United States. This shows how the market can change amid the uncertainty caused by Trump's tariff war.

According to commodity analysts Kpler, Canada exported 299,000 barrels of crude oil per day to China in April. This is up from 277,000 barrels in March.

The number of seaborne shipments into the United States in April was 286,000 bpd, which is roughly the same as March's 283,000 but lower than the record 431,000 bpd set in September last.

The above figures only reflect the oil that is transported by vessel and do not include the much larger amounts of crude imported from Canada via pipelines and rail.

Canada has been sending about 4 million barrels per day of crude oil to its southern neighbor via pipelines. While the volumes are steady, the prices have changed in Canada's favor, another unintended result of Trump's chaotic policies.

Western Canadian Select crude's discount to U.S. West Texas Intermediate is now at its lowest level in nearly 4-1/2 years, just under $9 per barrel. It was closer to $30 a few months ago.

The sanctions that Trump imposed on Venezuelan crude, which is also heavy like Canadian crude, have reduced the amount available to U.S. refining companies.

The United States refiners have to pay more because Canadian crude oil is in greater demand.

The increasing price of Canadian crude calls into question the notion that Canada is more dependent on the United States.

The United States appears to be quite dependent on Canadian crude oil, particularly if Trump has restricted the alternatives by imposing sanctions.

SEABORNE SHIFT

Canada also appears to have an advantage when it comes seaborne exports.

Since the Trans Mountain Pipeline expansion was completed in May of last year, Canada has increased its seaborne crude oil exports.

Initially, it was expected that most of the oil would go to refiners in the U.S. West Coast.

Canada's oil exports have changed since Trump returned to the White House late in January, and he increased his rhetoric as well as his actions against Canada's northern neighbour and former close ally.

Although Trump has now backed off on any tariffs on Canadian energy imports, the damage is done. Canadian oil producers are eager to find alternative markets.

Hence, China is the biggest oil consumer in the world. It has been eager to diversify its oil suppliers to reduce its dependence on the OPEC+ exporters.

China has effectively stopped importing crude oil from the United States due to the increase in tariffs by Washington and Beijing following Trump's return.

China has imposed a 10% tax on U.S. imports of oil, which is enough to make U.S. crude oil uncompetitive for Chinese consumers.

Kpler reports that no U.S. crude oil is expected to arrive in China between May and June. China imported 417,000 barrels per day from the United States as recently as last June.

The two grades of crude oil are not the same. China's oil trade is dynamic, and it is finding partners like Canada to help.

These are the views of the columnist, an author for.

(source: Reuters)