By Nia Williams and Stephanie Kelly
CALGARY (Reuters) – Canada’s Trans Mountain oil pipeline expansion (TMX), which will nearly triple the flow of crude from Alberta to Canada’s Pacific coast by early next year, is now being delivered primarily to refiners and exporters. Removing those barrels will shake up North America’s supply. In the US Midwest and Gulf Coast.
Its startup could add up to $2 a barrel to the prices paid by U.S. Midwest oil refineries located on Canada’s existing main oil-export route. Analysts said plants likely to benefit from the discounted oil include those operated by BP, Citgo Petroleum, Exxon Mobil and Koch Industries’ Flint Hills Resources.
“They will compete for barrels that no longer transit through their region,” said a Calgary-based oil trader. “The market has to adjust.”
The long-delayed and controversial Canadian government-owned C$30.9 billion ($22.81 billion) TMX project is set to begin shipping crude early next year, although it has been delayed by nine months due to a last-minute proposed route change. Might be possible.
Once operations begin, Canada will be able to ship an additional 590,000 barrels per day (bpd) to Pacific ports for delivery to refiners on the US West Coast and Asia, where demand for heavy sour crude is expected to grow in the long term.
Canada has supplied the Midwest with all of its crude oil imports since 2019, according to a Reuters analysis of Energy Information Administration data. This leaves Canadian oil producers at risk of huge price discounts or “blowouts” whenever pipelines become congested or ruptured.
Pipeline operator Enbridge, which ships the bulk of Canada’s 3.8 million bpd crude exports to the U.S., expects flows on its mainline system to drop to 300,000 bpd after the TMX opens.
Last December, a leak on TC Energy’s 622,000 bpd Keystone pipeline caused Canada’s steep crude discount to U.S. oil to exceed $33 a barrel, more than double its normal discount.
Having more Canadian export pipeline capacity means there should be less crude oil bottlenecks at Hardisty, Alberta storage hub, which will reduce volatility and keep prices stable.
“The US Midwest could count on this kind of explosion every year or two for a decade,” said Rory Johnston, founder of the Commodity Context newsletter. “It’s less likely now.”
He estimates that TMX’s start-up could add “a buck or two” to the cost of a barrel for Midwest refiners.
Re-export stopped on Gulf Coast
Matt Smith, a leading U.S. oil analyst, said TMX would make “re-export” of Canadian crude from the Gulf Coast less viable, undoing a trend that has set in motion in recent years and increased shipments of Canadian oil to China. Will do. Kepler.
Kpler data shows that so far this year, more than 200,000 bpd of Canadian crude has been re-exported from the U.S. Gulf Coast, up from about 73,000 bpd in 2019. China is currently the leading destination for these Canadian re-exports, at 194,000 bpd in August.
Heavy Canadian crude will still arrive in the U.S. Gulf for use by refiners, Smith said, and the region may also see an increase in Latin American crude being displaced from the U.S. West Coast by TMX barrels.
($1 = 1.3549 Canadian dollars)
(Reporting by Stephanie Kelly and Nia Williams; Additional reporting by Laura Sanicola; Editing by Marguerita Choy)