It’s a wash..For the first time ever, US oil exports roughly equalled the amount it imports from its largest supplier — Canada..According to the US government’s Energy Information Agency (EIA), the Lower 48 exported a record four million barrels per day (bpd) in the first half of this year, up 20% from this time last year..That was roughly equal to the 4.1 million bpd it imported from Canada, or about half of all its imports. .The difference is the US exports higher value light oil to countries such as the UK and the Netherlands and imports cheaper, heavier Canadian barrels at a substantial discount to world prices. .The rapid jump in US domestic production in the early 2010s increased domestic light, sweet crude oil production. Light, sweet grades of crude oil traditionally benefit from a price premium in the global crude oil market because they yield high amounts of profitable petroleum products from less complex refining processes, EIA said..“Heavy, sour grades of crude oil are often discounted compared with light, sweet grades of crude oil because they require more complex refinery units to produce profitable yields of refined products such as motor gasoline, diesel and jet fuel,” the EIA said in its most recent market update..“Most US crude oil imports take place when it is more profitable for US refiners to process discounted heavier grades because those refineries have already invested in the additional complexity required to refine them..On Tuesday, Alberta’s signature Western Canadian Select (WCS) blend at Cushing, Okla. was fetching US$78.04 per barrel, or about $8 less than the going $86 rate for West Texas Intermediate — or a subsidy of about $1 billion a month..But that cost benefit might not persist to the end of the year, when the Trans Mountain pipeline expansion comes on stream..On Friday, Trans Mountain announced that ‘line fill’ — the process of actually filling the pipeline in anticipation of future deliveries — will start in the first quarter of next year and take about six to seven weeks to complete. .Filling the entire line will take about 4.5 million barrels of oil before shipments can start, and will triple capacity on the existing line to 890,000 bpd and increase Canadian production capacity by nearly 600,000 bpd. .It wasn’t immediately clear if the majority of those barrels will head to Asia or refineries on the West Coast of the US, but traders are expecting higher demand — and prices — for Canadian crudes generally. By some estimates, the differential arbitrage, or discount, could shrink as much as US$2 per barrel.
It’s a wash..For the first time ever, US oil exports roughly equalled the amount it imports from its largest supplier — Canada..According to the US government’s Energy Information Agency (EIA), the Lower 48 exported a record four million barrels per day (bpd) in the first half of this year, up 20% from this time last year..That was roughly equal to the 4.1 million bpd it imported from Canada, or about half of all its imports. .The difference is the US exports higher value light oil to countries such as the UK and the Netherlands and imports cheaper, heavier Canadian barrels at a substantial discount to world prices. .The rapid jump in US domestic production in the early 2010s increased domestic light, sweet crude oil production. Light, sweet grades of crude oil traditionally benefit from a price premium in the global crude oil market because they yield high amounts of profitable petroleum products from less complex refining processes, EIA said..“Heavy, sour grades of crude oil are often discounted compared with light, sweet grades of crude oil because they require more complex refinery units to produce profitable yields of refined products such as motor gasoline, diesel and jet fuel,” the EIA said in its most recent market update..“Most US crude oil imports take place when it is more profitable for US refiners to process discounted heavier grades because those refineries have already invested in the additional complexity required to refine them..On Tuesday, Alberta’s signature Western Canadian Select (WCS) blend at Cushing, Okla. was fetching US$78.04 per barrel, or about $8 less than the going $86 rate for West Texas Intermediate — or a subsidy of about $1 billion a month..But that cost benefit might not persist to the end of the year, when the Trans Mountain pipeline expansion comes on stream..On Friday, Trans Mountain announced that ‘line fill’ — the process of actually filling the pipeline in anticipation of future deliveries — will start in the first quarter of next year and take about six to seven weeks to complete. .Filling the entire line will take about 4.5 million barrels of oil before shipments can start, and will triple capacity on the existing line to 890,000 bpd and increase Canadian production capacity by nearly 600,000 bpd. .It wasn’t immediately clear if the majority of those barrels will head to Asia or refineries on the West Coast of the US, but traders are expecting higher demand — and prices — for Canadian crudes generally. By some estimates, the differential arbitrage, or discount, could shrink as much as US$2 per barrel.
