Wednesday, December 31, 2014

Oil price war with Latin America threatens Canada’s oil patch?

A price war is brewing between Canada and Latin America over who will satisfy U.S. Gulf Coast refiners’ hunger for heavy oil.
Bank of Canada
The new Seaway Twin pipeline will almost double the amount of heavy Canadian crude coming to Gulf terminals and plants to about 400,000 barrels a day starting in January, according to Calgary-based based ARC Financial Corp. The shipments are growing even without the Keystone XL pipeline, which has been delayed for six years because of environmental opposition.
Keystone,or a reasonable facsimile, will be come to pass...
The Canadian supply will square off against crudes from Mexico and Venezuela that have traditionally fed refineries along the Texas and Louisiana coasts. State-owned Petroleos Mexicanos widened its discount for U.S. buyers in December by the most since August 2013. Valero Energy Corp. and Marathon Petroleum Corp., which invested in special equipment to refine heavy crude, stand to gain the most from the Canadian supply.
“Something’s going to have to give,” said Ed Morse, Citibank’s head of global commodities research in New York. “It’s going to have to be combination of Latin American countries exporting less into the U.S. or Canadian crude being re-exported and competing with crudes in other markets, particularly Europe.

( I have mentioned this scenario and the Keystone pipeline on more then one occasion)
Most recently in this post: Round up: MH-17, Syria,Turkey, Falling oil prices- what's next? The Fed & that bogus Sony hack!!

Brief digression-

This US export increase takes us right back to Canada "my home and native land" and that highly contested Keystone XL pipeline

Because US shale oil is not as great as has been announced it would seem if the US is going to begin exporting oil it’s going to be Canadian tar sands oil. As I had informed readers here some time ago- Canada supplies the US with the lions share of it’s oil- Not the middle east. And that fact has flown under the radar  of both the msm and many an alternative blogger.

Back to FP article
Transport South
New pipelines and rail terminals enabled more Canadian oil to head south to higher-value markets, partially offsetting a 48 per cent collapse in global prices since June as the Organization of Petroleum Exporting Countries refused to cut production to counter a global glut.
 The discount of Western Canadian Select priced in Hardisty, Alberta, to Mexico’s Maya crude has narrowed this year by more than half to $11 a barrel. Heavy Canadian crude will cost the same in Houston as Maya arriving by tanker, including the cost of transportation, according to data compiled by Bloomberg.

Latin American producers will price their crude to make sure it’s still attractive, said John Auers, executive vice president at Dallas-based Turner Mason & Co. an energy consulting firm. “It won’t all disappear anytime soon,” he said. The Gulf Coast “is the natural home for it.” 

 Fewer Imports 

While Canadian shipments have grown, imports from elsewhere contracted. U.S. refineries took in 4.3 million barrels of crude a day from the rest of the world in June, the lowest amount since 1992.
If Canadian crude can’t find a home on the Gulf Coast, producers may re-export it elsewhere. The U.S. bars most exports of its own oil, while allowing shipments of foreign petroleum that is kept separate from domestic supplies.
The Commerce Department granted 86 re-export licences from October 2013 through August. Cargoes have gone to Switzerland, Spain, Singapore and Italy this year, according to the U.S. Energy Information Administration.

Recall my comment from previous post?
 That said it appears there is a plan to knock the named oil producers out of the market enabling the US, with Canada's cooperation, to monopolize/control more of the global oil market. Consider also that this plan if it comes to fruition will leave Europe worse off then it is today.
It does seem I had that much correct- hurray!
Countries including Brazil and Saudi Arabia are investing in heavy oil plants now, though most of the ability to process those crudes is on the U.S. Gulf Coast

 “U.S. refineries built out their capacity to run heavy barrels,” Auers said. “Refineries in the rest of world aren’t built to run heavy barrels.”
Well that gives the US a definite upper hand! Suddenly, older news article claiming US biggest oil producer make so much more sense- Recall?  U.S. Seen as Biggest Oil Producer After Overtaking Saudi Arabia

 "The lack of alternative markets for heavy crude means Latin American countries will battle to maintain their share in the U.S"

“We haven’t seen anything like this,” Schork said. “This would be a first.”

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