Tourmaline Oil (TSX:TOU) stock has dipped 3% so far in 2026 as the United States attack on Venezuela for its oil reserves made Canadian oil exporters apprehensive. Canada’s biggest export is oil and its largest export partner is the United States. The US and Canada have built an oil infrastructure over the years, with Canada exporting 90% of its oil to the US and the US importing 60% of its oil from Canada.
However, US-Canada relations have been on edge since Donald Trump became the US President.
Canadian oil stocks’ resilience to the US hunger for oil
First, Trump imposed 10% tariffs on Canadian oil, a special tariff rate as opposed to 35% on other Canadian imports. This shows the US had a dependency on Canadian oil, even if Trump disagreed. Most of the US refineries are designed to refine the heavy crude that Canada supplies. The US shale oil is light crude.
With a vast oil pipeline network, Canadian oil producers absorbed the 10% tariff and stayed profitable. Back in 2016, they even survived the competition from US shale gas exploration that brought down the oil price to US$60 from US$100/barrel.
What does the Venezuelan oil mean to Canadian oil companies?
The United States is the world’s largest oil producer, but it does not have the largest reserves like Venezuela and Saudi Arabia. Having the largest reserves gives them a cost edge over Canadian oil companies.
Until now, Venezuela’s oil reserves were largely untapped; consequently, it was not significant on the global oil map and did not affect Canadian oil companies. The 1980s made Saudi Arabia what it is today as the US tapped its oil. While Saudi Arabia was in a civil war with political unrest, the US offered security for a promise to sell oil in US dollars, strengthening the demand for US dollars when other countries lost confidence.
History is repeating itself. Access to Venezuelan oil will give the US even stronger bargaining power against Canada and trigger price competition. The advantage Canada had over shale oil was that the US had the capacity to refine heavy crude. Venezuela’s oil is also heavy crude. The only difference is that Canada has a stable economy and an established pipeline infrastructure.
While the impact may not be immediate, it surely will be significant and lasting. Remember, an undeveloped economy and large reserves make it a distress buy, and Canada has to compete with that.
Now, Canada’s Prime Minister Mark Carney has been looking for new trade partners. He is visiting China, the world’s second-largest oil consumer. This has raised hopes for a new oil trade, but it won’t be without its risks. Canada doesn’t participate in the formal petrodollar system, where oil is exclusively priced in US dollars. If Canada replaces the US with China, it could face the risk of souring ties with its neighbour.
Where does Tourmaline Oil stand in all this?
The escalating geopolitical tensions have made Canadian energy stocks a hot topic. Tourmaline Oil has Canada’s largest and the world’s fourth-largest natural gas reserve. It has been paying special dividends on the realized gas price of $4/mmbtu.
The company’s cash flows are highly sensitive to US gas prices. For every US$0.10/mcf change on NYMEX, Tourmaline’s cash flow changes by $83, as against $49 for a US$0.10/mcf change for the Alberta Energy Company (AECO).
The US has the capacity to absorb oil and natural gas from both Canada and Venezuela and sell them to the world. It might not want to lose Canada’s oil and gas reserves to China. Canada has been one of the most stable oil-producing economies in the world. Access to their oil and gas is at the push of a button.
Tourmaline stock surged on North American natural gas export opportunities. The competition from Venezuela has led to a sell-off, creating a buying opportunity for dividend seekers.
