The Trans Mountain pipeline project is inching closer to becoming operational and a commodities analyst says Canada’s oil sector will benefit significantly once the pipeline project comes online.

The Trans Mountain is set to begin filling with crude in February, a key step toward becoming fully operational. Randy Ollenberger, managing director of oil and gas equity research at BMO Capital Markets, told BNN Bloomberg that the news is “hugely positive” for the Canadian oil sector. However, on Monday the company behind the Trans Mountain pipeline expansion said it encountered a technical issue delaying the completion date.

“This will be the first time in more than a decade we have spare pipeline capacity exiting the base. This is big, I think investors have forgotten about how big this could potentially be for the sector,” Ollenberger said in a Monday interview. 

Spare pipeline capacity will also reduce volatility for Canadian oil prices, Ollenberger added. As a result, he anticipates companies operating in the sector will receive better valuations and higher stock prices. 

Oil price impacts

In today’s commodity markets, Ollenberger said Canadian producers are competing to sell oil, which results in discounted prices. 

“We're going to be moving into a market where buyers are going to be competing to buy Canadian oil,” he said. “That price competition, we think, will result in a better price for Canadian oil relative to other benchmarks in the world.” 

Cash flow

This change in market dynamics is likely to benefit heavy oil producers in the Canadian industry, according to Ollenberger. 

“A company like MEG Energy, which is 100 per cent heavy (oil) with no downstream operations, they will see a substantive increase in their cash flow,” he said. 

With files from Bloomberg News