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US imports of Canadian heavy crude more than doubled from 2012 levels

The US will import more oil from Canada in 2018 than from all the OPEC countries combined –and four-fifths of those imports will be heavy oil, according to a new report by IHS Markit.

Imports of Canadian heavy crude are an increasingly important source of supply to the US, the world’s largest refining market for such crudes, with imports approaching 2.8mn b/d in 2018 – more than double what they were in 2012 – potentially exceeding 3mn b/d in 2020.

The US processed more than half of all heavy crude oil globally in 2018 – the result of investments by US refiners over the past 20 years to process heavier grades of crude, which made the refining sector more flexible and competitive. Unlike lighter crudes, where the boom in US tight oil production has backed out nearly all offshore imports, US demand for and import of heavy crude oil has continued.

Although Canadian oil supply growth faces challenges from transportation constraints, most of the supply expected from Canada will come from projects already in operation or in motion. Rail capacity is also expected to continue to build over the coming year, IHS Markit says.

‘The relative importance of Canadian heavy oil to the US market has increased and will continue to do so,’ comments Kevin Birn, Vice President, IHS Markit. ‘The US will import more than 3.6mn b/d of crude from Canada in 2018, more than the combined imports from all of OPEC. And most of those imports, about four-fifths, will be heavy oil.’

Canada has met a growing portion of US heavy oil demand as other traditional sources of US supply for that type of crude – such as Mexico and Venezuela – have fallen in recent years. It has become the largest producer of heavy crude oil in the world and, over the past few years, the only source of significant production growth of heavy crude globally.

The growing supply of Canadian heavy oil, which increased 1.1mn b/d from 2012 to 2017, has managed to offset most of the contraction in heavy oil supply elsewhere to date, according to the market analyst. In 2018, the US will import 2.8mn b/d of heavy oil from Canada and more is expected in the future. However, the report does qualify that consolidation in the oil sands industry and lagging infrastructure is expected to slow growth in the coming years, and may be a source of uncertainty for US heavy oil demand in the longer term.

‘The effect of Canada’s expanding market share has been to shore up the US heavy oil market,’ notes Vijay Muralidharan, Director, IHS Markit. ‘Without [?]Canadian supply, heavy oil may otherwise be more scarce and expensive.’

 

News Item details


Journal title: Petroleum Review

Countries: USA - Canada -

Subjects: Oil markets, Refining, Heavy fuel oil

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