Canadian Oil Pushes Deeper Into U.S. Gulf Coast Market

Canada remains the dominant supplier of crude to the United States, with an integrated cross-border energy system that has developed over more than seven decades. After meeting domestic refining demand, roughly four out of every five barrels produced in Canada are exported, and about nine in ten of those barrels head to the U.S. The Canada Energy Regulator reported that Canadian crude shipments reached a record 4.3 million bpd in 2025, of which 3.9 million bpd went to U.S. buyers.

Access to U.S. Gulf Coast refineries has increased with new export infrastructure. Enbridge’s Houston Oil Terminal (EHOT), which entered service in July, gives Canadian heavy crude a direct route to Gulf Coast processing and marine export docks. That region hosts some of the world’s largest clusters of refineries configured to process heavy, sour grades, making it a natural fit for Canadian barrels as refiners seek alternatives to declining Mexican supplies and uneven foreign sources. Enbridge plans to expand EHOT’s storage capacity from 2.5 million barrels to 15 million barrels to accommodate more flows.

Despite the new route, the Midwest remains the largest U.S. destination for Canadian crude, averaging about 2.75 million bpd in 2025 and rising to roughly 2.92 million bpd in the first half of 2026. Gulf Coast processing of Canadian crude has been smaller and volatile: PADD 3 handled an average of 416,000 bpd in 2025, falling to roughly 337,000 bpd in the first half of 2026 after 526,000 bpd in 2024 (EIA January–June data). EHOT’s purpose is in part to reverse that trend by pushing more heavy Canadian barrels into Gulf Coast refineries.

Canada is also boosting its Pacific export capacity. The Trans Mountain expansion nearly tripled pipeline capacity to 890,000 bpd when it began service in the second quarter and reached full utilization in June. The operator plans additional increases — 90,000 bpd in the fourth quarter and 210,000 bpd by the end of 2028 — with most of the extra volumes expected to flow to Asian markets, according to Reuters. At the same time, geopolitical and production trends — including falling Mexican output, rising but uncertain Venezuelan supply, complications linked to the Iran war, and the lighter quality of rising U.S. Permian production — are reinforcing demand for heavier Canadian crude.

Trade tensions between Ottawa and Washington have so far left energy trade out of the dispute. Canada implemented retaliatory tariffs on C$27.6 billion of U.S. goods at rates of 15%, 25% and 50% to mirror U.S. Section 338 measures, targeting items such as steel, dairy and electronics. The White House explicitly excluded energy, potash and certain critical minerals from its 50% tariffs, preserving the cross-border oil trade for now.