Canadian oil pouring into the United States on new pipeline connections is trickling onto global markets, dodging export snarls that threaten the energy industry’s growth plans as crude prices slump. More than two million barrels of mostly heavy oil from Canada’s oil sands have been exported from the US Gulf Coast since May last year, according to ClipperData, an industry firm that tracks crude oil tanker movements.
Crude prices continued to rise on Tuesday, with WTI closing at $53.98 (US), its highest since Dec. 14, and Brent hitting $59.10. But analysts say inventories are building at key locations, such as Cushing, Okla.A Reuters report said BP PLC and Royal Dutch Shell PLC are the latest energy companies to take advantage of a quirk of U.S. law that allows for exports of Canadian oil as long as they aren’t mingled with U.S. product.
Analysts have been anticipating a spike in such shipments for months, as more crude finds its way south on expanded and new pipeline routes from Alberta’s landlocked oil sands.Delays to multibillion-dollar export projects such as TransCanada Corp.’s Keystone XL and Enbridge Inc.’s Northern Gateway have undercut Alberta oil production forecasts and led to steep price discounts on Canadian oil as fast-rising production backs up along existing networks.
But companies have managed to carve out pathways to global markets anyway. Suncor Energy Inc., for example, shipped a 700,000-barrel batch of heavy Alberta crude from Sorel-Tracy, Que., last September. It marked the first time the company had exported Western Canadian oil to Europe, where crude fetches higher prices compared to North America.The global exports, although marginal today, “are going to ramp up over time,” said Martin King, vice-president, institutional research at FirstEnergy Capital Corp. in Calgary.
