Canadian crude Gulf Coast exports rise as Venezuelan gap is filled

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Canadian crude Gulf Coast exports rise as Venezuelan gap is filled

 

 

Heavy crudes have poured into the United States this spring, offsetting the loss of Venezuelan oil and producing a mini-surplus, with Canadian heavy crude this month being exported from the U.S. Gulf Coast.

U.S. refiners have lined up larger supplies from Canada, Iraq and Colombia since Washington in January began choking off the flow of dollars to Venezuela's socialist government by barring transactions with PDVSA, Venezuela's state oil company and once among the top three providers of heavy crude to U.S. refiners. The United States went from importing 561,000 barrels per day (bpd) of Venezuelan oil in January to zero barrels in May.

This month, more than 130,000 bpd of heavy Canadian crude is scheduled to depart from Texas, four times the average exported in 2018, trade sources said.

U.S. Gulf Coast imports of Mexico's heavy Maya crude increased 12% to 459,000 barrels per day (bpd) in May from January, according to Refinitiv Eikon and U.S. Customs data.

Mexico reduced its Maya crude export price to the U.S. Gulf Coast buyers by $1 a barrel for July deliveries after back-to-back increases in May and June.

“Refiners probably over-imported a bit” of heavy crudes, said a trader familiar with the exports, noting the resulting surplus and a larger discount to the U.S. benchmark for the Canadian crude “opens the arb (arbitrage) for export.”

Crude-by-rail loadings from Western Canada - much of it bound for U.S. refiners - rose to an average 231,000 barrels per day (bpd) in May, from 144,000 bpd in February, according to market intelligence firm Genscape.

The May increase came as Western Canadian Select's (WCS) discount to U.S. crude widened to an average of minus $14.03 a barrel in May, from $10.40 a barrel between February and April, Genscape data showed. The wider discount makes the oil more attractive to potential buyers.

Crude inventories in the U.S. Gulf Coast last month also rose to 248.3 million barrels, from 219.9 million barrels a year ago, according to U.S. Energy Department data.

The tanker New Dream, chartered by commodities trader Mercuria Energy Group, departed on June 16 from Galveston loaded with more than 1 million barrels of heavy Canadian crude, and is headed to Asia, according to vessel tracking data from Refinitiv Eikon and ClipperData.

Another 3 million barrels of Canadian crude are due to be exported from the Gulf Coast by June 30, according to an oil trader familiar with the matter. Their destinations could not immediately be learned.

The exports are surprising given the Alberta government this year required producers to curb production. The restrictions narrowed Western Canadian Select's discount to the U.S. benchmark, to $11.25 a barrel discount to WTI on Friday, a difference that had reached as much as $50 a barrel below last October.

In a sign of how quickly refiners were able to replace Venezuelan barrels, Citgo Petroleum Corp, a subsidiary of PDVSA, is now sourcing all the heavy oil it needs from Canadian, Mexican and Colombian suppliers, according to Refinitiv Eikon data.

Citgo and PBF Energy each imported more than 1 million barrels of Colombian Castilla crude in total last month to their Gulf Coast plants, said a person familiar with the matter.

Following U.S. sanctions on PDVSA, imports of heavy Colombian crude to the U.S. Gulf Coast rose in May to nearly 228,000 bpd, from about 118,000 bpd in January, Refinitiv Eikon data showed.

Phillips 66, another Gulf Coast refiner, has become the largest U.S. purchaser of Canadian crude. It relies on a combination of U.S., Canadian and foreign crude for “a pretty balanced slate across our system,” spokesman Dennis Nuss said.