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US crude exports jump sixfold as Canadian refiners tap into shale boom

06.16.2014  | 

The US shipped 268,000 bpd in April, the Energy Information Administration reported Monday. That’s the most since April 1999, and a more than sixfold increase since April 2012.



Oil exports from the US in April rose to the highest level in 15 years as Canadian refineries replaced more expensive imports from Europe and West Africa with shale oil from North Dakota and Texas.

The US shipped 268,000 bpd in April, the Energy Information Administration reported Monday. That’s the most since April 1999, and a more than sixfold increase since April 2012. Federal law allows exports of unrefined crude to Canada and restricts them to most other destinations.

The increase in exports follows a boom in oil production driven by horizontal drilling and hydraulic fracturing, or fracking, in places like North Dakota and Texas. The surge in output has increased supplies in the US, driving down prices relative to the rest of the world.

“The boom in US production caused a price differential to grow between foreign crude and US crude,” said Carl Larry, president of Oil Outlooks & Opinions in Houston. “The margins for US crude are just so good that there’s no reason a Canadian refinery wouldn’t want to use it if possible.”

US crude output rose to 8.47 million bpdin the week of May 23, the highest level since 1986. Eagle Ford light crude in south Texas sells for $9.71/bbl less than Brent, the benchmark for European and African oil, according to data compiled by Bloomberg. It costs $2/bbl to ship crude from Texas to Canada, Marathon Petroleum said in a May presentation.

Canadian Refineries

Exports to Canada from the US Gulf Coast averaged 134,000 bpd in the first quarter, according to the EIA. March US exports were 246,000 bpd.

Refineries on Canada’s East Coast are designed to process light, low-sulfur crude like the type produced by fracking in the US, said Hannah Breun, a Washington, DC-based analyst for the EIA. Plants on the US Gulf Coast are generally better suited to refine thick, high-sulfur crudes from Mexico, South American and Western Canada.

Corpus Christi, Texas, the closest port to the Eagle Ford field, shipped out 468,000 bpd in April, according to data from the city’s Port Authority. That’s up from 15,000 bbl two years earlier. About 80% of that oil stays in the Gulf Coast, with the rest going to Canada and the US East Coast, according to Brad Barron, CEO of NuStar Energy.

Refineries in Ontario, Quebec and Canada’s Atlantic Coast imported about 615,000 bpd in February, according to the country’s National Energy Board. Under current export rules, shipments to Canada from the US will rise to 400,000 bpd in 2015 and stay at that level through 2020, said Damien Courvalin, a New York-based analyst for Goldman Sachs.

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John Light

California has elected to put a $.06 per gallon tax on crude oil delivered either by pipeline or railroad. This will keep out of state refineries even busier, while California (again) shoot itself in the foot with job loss.

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