In the United States, Canadian heavy crude oil is increasingly flowing to the Gulf Coast. However, these barrels, re-exported, compete with oil from the US strategic reserves. Since the Russian-Ukrainian conflict, there has also been competition with oil from the Russian Urals supplying China and India.
Increase in capacity
In the United States, as elsewhere in the world, the Russian-Ukrainian conflict and global sanctions are disrupting crude oil flows. This situation is taking place in a context marked by the end of the bottleneck of the Canadian oil pipeline to the United States. Completion of Enbridge’s Line 3 replacement project allows for additional pipeline capacity.
Enbridge’s mainline is now capable of exporting more than 3.1 million bpd to the United States. Earlier this year, Enbridge was undertaking further expansions to move more crude oil to the Gulf of Mexico. In addition, the reversal of the Capline pipeline allows Canadian oil sands to be transported to the St. James hub in Louisiana.
In the United States, the decision to tap into the strategic oil reserve in Texas and Louisiana is creating a glut. Increased competition has little impact on the price of barrels along the Gulf Coast. In fact, the strong increase in global demand is not affecting the level of prices, which remain high.
As of June 17, weekly U.S. crude oil exports exceeded 4 million b/d. An estimated 4.3 million barrels of crude oil passed through the terminals in the United States. This represents a weekly increase of more than 1 million b/d.
China andIndia are turning to Russian oil from the Urals, promoting competition with North American oil. European refiners are looking for barrels at a lower cost than those from the North Sea. This dynamic in price differentials weighs on the level of purchases.
In the U.S., Western Canadian Select averaged a discount of $8.59 per barrel out of Texas in June. The year-to-date average is a discount of $5.54 per barrel. The Biden administration’s release of 180 million barrels over 6 months is an effort for global oil supply.