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U.S. exporting more crude oil to Canada

Repost from Bloomberg Business News

Canadian Refiners Set to Buy More U.S. Oil With Wider Discount

By Robert Tuttle, March 18, 2015 4:14 PM PDT 

(Bloomberg) — Cheaper North American oil is poised to replace West African and Middle East cargoes at eastern Canadian refineries with U.S. crude prices at the lowest level compared with the international benchmark in 14 months.

Imports to Canada from outside North America averaged 244,089 barrels a day this month through March 15, down 27 percent from a year earlier, according to New York-based ClipperData, which tracks tanker shipments.

Canada, the world’s fifth-largest oil supplier, produces most of its oil in the western province of Alberta and exports it south to the U.S. A lack of pipelines means Canada’s eastern refineries depend on imports by tanker and train.

U.S. export “volumes have been growing pretty exponentially,” Katherine Spector, a commodities strategist at CIBC World Markets Inc. in New York, said by phone Wednesday. U.S. oil is “going to Eastern Canadian refineries and displacing waterborne light crude.”

U.S. crude oil exports averaged 478,000 barrels a day the week ended March 13, up almost eightfold from a year earlier, preliminary data from the Energy Information Administration show. Canada, the only country that U.S. producers can export to without restrictions, receives the bulk of the shipments.

Oil has flowed north as West Texas Intermediate crude’s discount to Brent averaged $9.43 a barrel this month from $2.41 in January as U.S. stockpiles rose to a 458.5 million barrels, the most in decades.

The U.S. displaced Algeria in 2013 as Canada’s biggest source of imported oil and accounted for about half of imports in the first eight months of last year, the country’s National Energy Board said in a November report. The trend was driven by availability of tight oil from North Dakota as well as Texas, New Mexico and Colorado.

Bakken crude from North Dakota traded at about $40 a barrel today versus $55 for oil from West Africa, according to data compiled by Bloomberg.

“Especially with lower prices, a difference of a dollar or so in transport costs is significant,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone Wednesday. “If you can bring it in from the U.S. rather than West Africa, it’s a little closer and cheaper.”

Expanded rail capacity has linked U.S. oil producers with Canada, Spector said. The movement parallels the movement of Bakken crude to U.S. East Coast by rail, which cut the region’s imports of crude from Nigeria by half in two years and from Algeria by 81 percent, EIA data show.

“The maritime provinces of eastern Canada do resemble the U.S. East Coast in many ways,” Antoine Halff, head of the International Energy Agency’s oil industry and markets division, said in a March 18 phone interview. “When Bakken crude started being railed to the U.S. East Coast in significant quantities, it displaced imports from West Africa.”

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    US “Not Immune” to Oil Price Hike

    Repost from Oil Change International
    [Editor: Significant quote: “Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.”  – RS]

    US “Not Immune” to Oil Price Hike

    Andy Rowell, June 16, 2014

    Crisis_in_Iraq_leading_to_higher_gas_pricesFor years the American oil industry has argued that the ongoing U.S. oil boom will bring about “energy independence” and drive gasoline prices  down. Americans are supposed to be enjoying an era of cheap, plentiful energy.

    As the oil industry has set about fracking America, decades of declining production has been reversed in just a handful of years. The US is now the world’s largest producer of oil and gas.

    The oil industry has persuaded or forced communities across North America to compromise their water supplies and their health to allow the fracking revolution with the promise of lower prices and energy security.

    So American consumers should apparently be appreciating the impact of the country’s shale revolution as crude oil and condensates production has just surpassed its previous peak, reached way back in 1970. A 44-year old record has just been broken.

    Not so. As the Energy Policy Information Centre pointed out, at the end of last month. “Despite all the promise of the oil boom, for most Americans, its economic benefits remain an abstract concept in the absence of relief at the gas station.”

    The sad truth is that despite the US economy being half as “oil intense” compared to the 1970s – as measured by barrels of oil consumed per $1,000 of GDP –  American households and businesses still spend a staggering 900 billion dollars annually on petroleum.  The average American household dedicates around 5.3% of its spending to petroleum, with the burden felt much more heavily by low income households.

    And here comes the real irony. Despite the US reaching a record production peak, last week the price of Brent crude rose 4 per cent, its biggest one-week rise since July last year. Wholesale US gasoline rose with it and thus US consumers will notice higher pump prices probably as soon as this week (see chart).

    FT RBOB Gasoline 10 days to June 16Source: Financial Times

    And the reason is the ongoing turmoil in Iraq. The escalating violence there is threatening supplies from OPEC’s second largest producer, which produces in excess of 3 million barrels of oil a day.

    Bloomberg is quoting Societe Generale saying that if the violence escalates and production is affected, Brent crude may jump from its current position of $113 to $120 or even $125. It may go even higher.

    “This is a serious situation in terms of the global oil market,” Victor Shum, a vice president at IHS Energy Insight in Singapore, told Bloomberg. “This situation in Iraq really threatens potential supply growth going forward.”

    So far the fighting has not spread to the south, where the US Energy Information Administration estimates that three-quarters of Iraq’s crude output is produced. But if the Southern oil fields fall, the global oil price could skyrocket to unprecedented levels.

    What this shows, as Ed Crooks, points out in today’s Financial Times is that, despite its own fracking revolution, “the US is not immune to the effects of disruption in world markets.”

    Put simply the oil boom has not insulated American consumers from the price spike that the violence in Iraq will cause. And Iraq is not the only major oil producer with ongoing political instability. Think about recent events in Nigeria, Venezuela and Libya, to name just three.

    The boom that is needed in order to truly insulate the American economy from the relentless turmoil in oil producing countries is a boom in efficiency, public transit, smart growth and electric vehicles. These technologies and policy initiatives are here now and ready to go, but the political and financial weight behind them has been overshadowed by the lure of oil boom riches.

    Instead of “All of the Above“, we need energy policies that will help American’s reduce the amount of oil they need to buy, at any price.

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