HOUSTON/CALGARY, Alberta—Shipments of Canadian crude from the U.S. Gulf Coast since May have more than doubled all of 2018's exports as Asian refiners scramble for heavy sour oil, according to vessel-tracking data, traders and industry sources.
Following U.S. sanctions on Venezuela in late January, Asian refiners have sought new heavy oil supplies in a hunt that has benefited Canadian oil exporters since this summer.
Thirty-two cargoes with a combined 16 million barrels of Canadian crude loaded in the U.S. Gulf Coast from May until mid-September have been shipped mainly to buyers to China, India, South Korea and Europe, according to market intelligence firm ClipperData. Last year, such shipments totaled 7.7 MMbbl.
About 7.3 million barrels of this year's volumes were discharged in or were headed to China, it said. The majority of September's five loadings are heading toward India, including the tanker, Marathi, due to arrive in Sikka next month, according to data from ClipperData and Refinitiv Eikon.
These shipments came as U.S. refiners, which have drawn on Canada for heavy crude, pulled stock from inventories and ran at reduced rates compared with last year, traders said.
Canadian shippers may accept "taking a discount now if it means they can get more buyers later," said Matthew Blair, a refining analyst at Tudor, Pickering, Holt & Co.
Western Canada Select (WCS) heavy blend has been trading at a discount of roughly $14-$11 per barrel to West Texas Intermediate crude futures in recent months, and is expected to remain strong because of Alberta production curtailments. It sold for as much as a $52.50 discount last October.
Alberta this year mandated oil production cuts to ease congestion on export pipelines and lessen a glut that hurt prices. It has been relaxing curbs throughout the year, easing curtailments to 3.81 million barrels per day (MMbbl/d) by December, from 3.56 MMbbl/d in January.
The economics of exporting Canadian crude from the U.S. Gulf Coast was helped this year by a wide spread between Brent and U.S. crude in the summer that made WTI-linked Canadian barrels more competitive versus Brent-linked barrels.
More Canadian crude could soon reach the Gulf Coast thanks to pipeline company Enbridge Inc adding up to 100,000 bbl/d of capacity to its Mainline network by December through efficiency improvements.
But traders said the economics of exporting more Canadian grades would be challenged given ongoing Alberta curtailments keeping prices tight, and a recent narrowing of the Brent-WTI spread.
Recommended Reading
TPH: LNG Agreements Start to Materialize, but Most Non-binding
2024-09-17 - Since the end of April, U.S. LNG export facilities have made agreements totaling 16 mtpa, or 72% of the year’s 22.5 mtpa in offtake agreements.
Chesapeake Pushes to Move 10% of US Shale Gas into Asian Markets
2024-09-17 - Chesapeake Energy is targeting getting 10% to 15% of its production onto an international index, the company’s Executive LNG Adviser Katrina Kaufman said Sept. 16 during the Asia-US LNG Roundtable.
Chevron’s Wirth: Biden Admin Needs to Embrace, not Attack Natgas
2024-09-17 - Chevron CEO Mike Wirth, speaking at Gastech Houston 2024, said natural gas offers a clear path to lowering CO2 emissions that only politics can derail.
No End in Sight: Biden’s Pause Has Far-reaching Consequences
2024-09-17 - Biden’s LNG pause is raising costs for LNG export projects, and its effects are far and wide in the U.S. LNG industry.
Vitol Grows LNG Bunkering Fleet by 3 Ships
2024-07-07 - LNG trading company Vitol Group is emphasizing the environmental benefits of using LNG as a shipping fuel with the acquisition of three bunkering vessels to fuel ships.