Crude Oil Export Plunge Widens Canada Trade Deficit

Canada’s oil shipments plunged in November, triggering the biggest export drop in almost three years and widening the national trade deficit.

Shipments of crude oil and bitumen dropped 9.9 percent to C$6.9 billion in November, the biggest decline since February 2011, Statistics Canada said today from Ottawa. Prices fell 6.7 percent and volumes by 3.4 percent. It was the sixth straight monthly decline in energy shipments.

The report is a setback for policy makers relying on foreign demand to lead an economic recovery. Plunging prices for Canada’s top export may curb the value of shipments abroad this year, eroding any benefit manufacturers receive from faster U.S. growth and a lower currency.

Canada’s trade deficit expanded to C$644 million ($544 million), the widest in a year, exceeding the highest forecast of 14 economists in a Bloomberg News survey, which had a median of C$200 million. The statistics agency revised its October reading to a C$327 million deficit from a C$99 million surplus.

“The November merchandise trade report was bleak,” said Benjamin Reitzes, a senior economist at BMO Capital Markets in Toronto. “The trade deficit is likely to worsen materially due to the steep drop in energy prices.”

Canada’s total exports fell 3.5 percent to C$43.3 billion, the biggest drop since January 2012. Sales fell in nine of 11 categories, including an 8.3 percent decline to C$4.95 billion for metal and non-metallic minerals.

Surging Supply

West Texas Intermediate oil dropped below $48 a barrel yesterday for the first time since April 2009 as surging supply signaled that the global glut that drove crude into a bear market will persist. Bellatrix Exploration Ltd. said Dec. 22 it would cut its 2015 capital budget to C$300 million from C$400 million, citing lower energy prices. The Calgary-based company develops oil and natural gas projects in western Canada.

Imports fell 2.7 percent to C$43.9 billion, the first decline since June, Statistics Canada said.

The volume of exports declined 1.6 percent, and import volumes fell 1.7 percent, Statistics Canada said. Volume figures adjust for price changes and can be a better indicator of how trade contributes to economic growth.

The surplus with the U.S. narrowed to C$2.9 billion in November from C$3.2 billion a month earlier. Exports make up about one-third of Canada’s economy, with about 75 percent of the shipments going to the U.S.

‘Red-Ink Month’

The deficit with countries other than the U.S. widened to C$3.6 billion from C$3.5 billion.

“This is a red ink month, it seems almost completely across the board as Canadian merchandise exports took a breather,” Peter Hall, said chief economist at Export Development Canada in Ottawa, a government financing agency. “Pushing the panic button is not on at this moment, because leading up to this we have had a strong run.”

Exports remained 8.4 percent higher in November than they were 12 months earlier, and energy products were 1.1 percent greater, Statistics Canada said.

Canada’s dollar was little changed at C$1.1827 per U.S. dollar at 10:23 a.m. Toronto time after touching the lowest in almost six years today. The weaker currency makes Canadian goods cheaper for international customers.

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