In July 2024, U.S. imports of crude oil from Canada reached a historic level of 4.3 million barrels per day (b/d). This surge followed the expansion of Canada’s Trans Mountain pipeline. July is the latest month for which data is available from the Petroleum Supply Monthly (PSM).
The Trans Mountain Expansion (TMX) tripled the pipeline’s previous capacity of 300,000 b/d when it began commercial operations in May 2024. This expansion allows more crude oil from Alberta, a landlocked province, to reach Canada’s west coast for export. Traditionally, most crude oil from Alberta was sent to refiners in the U.S. Midwest through pipelines or transported to the Gulf Coast by rail for refining or further shipping.
TMX, alongside the original Trans Mountain pipeline, is designed to transport larger quantities of crude oil to British Columbia’s coast, enabling direct exports to Pacific markets. Since TMX became operational, early data shows that refiners on the U.S. West Coast have been significant purchasers of the increased export volumes. From June to September, over half of all maritime crude oil exports from Western Canada went to the U.S. West Coast, with the remainder shipped to Asia, according to Vortexa Analytics. In July 2024, the U.S. West Coast imported 498,000 b/d of crude oil, marking a record for the region and a 115% increase compared to July 2023.
The Western Canadian Select (WCS) crude oil spot price at Hardisty serves as a benchmark for Alberta’s regional production. Historically, WCS prices have been lower than other benchmarks due to its quality and the challenges of transporting it from inland locations to coastal export sites. Unlike Brent, the global benchmark, WCS has a higher sulfur content and lower API gravity, which increases transportation costs.
Since TMX launched, the added capacity has had mixed effects on WCS prices. In July 2024, the average Brent price premium to WCS was $21 per barrel, which is $5 higher than a year earlier, despite the increased capacity from TMX. The price difference in August compared to the five-year average (2019-2023) was similar to last year, while the September average was slightly lower than the five-year average. As of October 29, the Brent price premium to WCS for October is $10 lower than in October 2023.
Typically, the WCS price differential to Brent and other benchmarks widens in the fall when refiners in the Midwest scale back operations for maintenance. This reduction limits the buyer pool for Alberta’s crude. If the current price differentials persist through the end of the year, it may indicate that the added TMX capacity has shielded Canada’s crude oil producers from the operational choices of U.S. Midwest refiners.
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