U.S. Refiners Face New Crude Squeeze as Canada Cuts Oil Sands Output

U. S. Refiners Face New Crude Squeeze as Canada Cuts Oil Sands Output Irina Slav Tue, August 25, 2026 at 11:00 PM GMT+2 4 min read U.

S. refineries have been running at full speed for months to make up for lost fuel supply from the Middle East. Fuel exports from the United States have been breaking records.

This may be about to change, and not because of the war. It is oil sands maintenance season in Canada. In September, Canadian crude oil production may drop by 300,000 barrels daily due to maintenance activities in the oil sands, Rystad Energy said this week, as quoted by Bloomberg.

Usually, whenever such a seasonal disruption occurs, it gets offset with crude from storage. Unfortunately, crude in storage is also lower than usual—the lowest in 12 months, per the report. Normally, Canadian oil producers send 4 million barrels daily of heavy crude to U.

S. refiners. Next month, there will be less, which will be felt because demand for fuels remains strong despite some demand destruction by higher prices.

According to the Bloomberg report, all major oil sands operators will be cutting production for maintenance, and pipeline operators have stopped rationing space on their pipes in evidence they expect lower demand in September. The problem is there is no replacement for Canadian crude, even with oil shipments from Venezuela ramping up—because they are not ramping up fast enough. Venezuela exported 1.

16 million barrels of crude oil daily last month, a slight decline from June's 1. 2 million barrels daily, because PDVSA withdrew less crude from storage, according to a Reuters report from earlier this month. Related: BLM Sets October Oil and Gas Lease Sale for Montana and Dakotas The fact that Venezuela is drawing on inventories to cover export demand suggests production has yet to pick up meaningfully.

Indeed, July exports to Venezuela's biggest oil destination, the United States, averaged 786,000 barrels daily, which was the highest since early 2019, and up from 284,000 barrels daily in January 2026, before the U. S. federal government sent forces to Caracas to remove President Nicolas Maduro and establish U.

S. control over the South American country's oil industry. All in all, it appears the recovery in Venezuela's oil production has been progressing more slowly than hoped, with all the supermajors that used to operate in the country wary and taking their time to make the decision whether to return.

There have been some deals signed in recent months, with service providers and smaller American oil companies, which seem more willing to take the risks of operating in the country, which has yet to see a stable political and fiscal environment for large-scale operations. Story Continues Meanwhile, the situation in the Middle East is not improving, despite claims from Washington that tanker traffic has normalized, which tanker-tracking companies have not been able to verify, per a recent Wall Street Journal report . Ukrainian drone attacks on Russian refineries continue, squeezing gasoline and diesel production there as well.

Global fuel supply remains constrained, especially in diesel, which caused refining margins to hit all-time highs earlier this month. The diesel crack spread hit $100 per barrel for the first time in history in mid-August. Now, with 300,000 barrels daily of Canadian crude about to go offline in September, this record might yet get broken, just when demand for fuels picks up ahead of the heating season, when it hits a seasonal high.

If the fuel supply balance remains compromised, there will be further demand destruction, starting from the most vulnerable markets and later spreading to the more resilient ones. This will in turn have implications for economic growth and inflation. There can be little doubt that the Middle East war will drive higher inflation across the globe as it moves closer to its seventh month, with no resolution in sight and more escalation as the United States has just widened its sanctions against Iran.

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