More Canadian crude than ever is heading overseas, but many of the tankers aren’t leaving from Canada’s shores. Photo credit: Pexels/Jeffry Surianto
Canada’s relationship with the United States as virtually its only customer for oil exports has finally begun to break, according to a leading energy analyst.
More volumes than ever of Canadian oil are heading overseas, but many of the tankers aren’t leaving from Canada’s shores. The oil is being “re-exported,” that is, sent to the U.S. by pipeline or rail and then loaded for international markets from terminals on the U.S. Gulf Coast.
“It looks like Canada’s crude oil exports are finally showing off their stuff and stepping out on the town,” wrote Martin King, senior analyst with RBN Energy, in a recent report.
“This year, much stronger international demand has sent re-export volumes to record highs.”
Since the 1950s, Canada has been exporting crude oil to overseas markets through the Trans Mountain pipeline, but King notes those volumes have generally been “very modest” at under 100,000 barrels per day.
That’s expected to change with completion of the Trans Mountain Expansion, adding up to 500,000 barrels per day of additional international export capacity, King said.
This will give Canadian oil producers something they’ve long been waiting for – options of how to send their crude to growing markets overseas.
Citing U.S. Census Bureau data, King said that an average 130,000 barrels per day of Canadian heavy oil was re-exported from the U.S. Gulf Coast last year.
So far this year re-exports averaged 200,000 barrels per day, topping 300,000 barrels per day in March, underlining strong demand from customers outside the U.S. including China, India and Spain.
The rise in Gulf Coast re-exports is thanks to increased pipeline access following the completion of Enbridge’s Line 3 Replacement Project in 2021, as well as additional access on other Enbridge and TC Energy pipelines, King said.
The Russia/Ukraine war and OPEC+ crude production cuts have also caused importing countries like China to “look further afield” for oil, he said.
Total American oil exports have surged amid the shifting oil flows, according to data from the U.S. Energy Information Administration (EIA).
In 2021, the United States exported an average 2.9 million barrels of oil per day. In 2022 this increased to 3.6 million barrels per day, and so far this year has averaged nearly 4 million barrels per day.
Despite increased investment in renewable energy sources, world oil consumption this year is at a record 102 million barrels per day, according to the International Energy Agency.
This article first appeared on the Canadian Energy Centre on Sept. 29, 2023.
