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Eight Capital thinks the clause presents an opportunity for Canada. Citing the trade deal’s wording, the bank said “it is possible to believe that Canadian oilsands/heavy oil that travels through the U.S. via a U.S. subsidiary, refinery, or marketer is considered a U.S. raw material that falls under this definition.”

“China is becoming an even greater consumer of heavy oil and therefore this is especially a positive for Canadian heavy oil/oilsands that can get access to the U.S. Gulf Coast where it could be exported,” the investment bank said.

Canadian production of heavy oil is also bolstered by efforts to add export pipelines, Middle East tensions and the “non-event” of new marine fuel regulations, equity research managing director Phil Skolnick and associate Jeff Ebbern wrote.

However, Canadian oil faces strong headwinds. The price of benchmark West Canadian Select crude trades at US$20 or more a barrel discount to the lighter West Texas Intermediate oil because it needs more refining.

Canada also lacks pipeline export capacity and the country has just one main market, the U.S. Canadian producers are striving to reduce this differential by building new pipelines, potentially to the West coast for a shorter route to Asia, and by promoting the attractiveness to investors of oilsands reserves that typically last longer than those of U.S. shale operations.

“We believe differentials can start to narrow towards pipeline economics possibly in the first half of 2020,” Eight Capital said in the report. “Especially as the Keystone Mainline recovers to 100 per cent of capacity post the late 2019 leak. Plus, there is potential for further improvement with the recent start-up of TMX construction and the latest news on the U.S. side of Line 3, whereby an updated environmental review released by a state agency recently found no serious threat to Lake Superior if crude oil ever leaked from the line.”