🇺🇸 ❌ 🇨🇦 🛢 ➡️ 🇨🇳 Tariffed Canadian Oil likely to end up in China

Heavy sour crude such as those extracted in Venezuelan and Western Canadian fields are required by US refineries to mix with lighter, sweeter crude oil produced at US shale fields such as Bakken (North Dakota) and the Permian Basin (Texas).

A recent expansion to Canada's Trans-Mountain Pipeline was finally completed last year, expanding transit capacity of heavy Albertan sand-oil to the port city of Vancouver from 300,000 barrels per day to 900,000 barrels per day.

This has enabled US West Coast refineries to shift their purchases of heavy oil to cheaper, nearer West Canadian feed.

However, given cost overruns during its construction, transit tolls on the Trans-Mountain Pipeline have made spot shipments uneconomical.

The pipeline currently operates well below capacity. US tariffs on Canadian oil could change this dynamic, rerouting more West Canadian crude away from American refineries in the Midwest and towards Vancouver.

Existing crude supply headed to Californian refineries would also no longer have uncontested pricing advantage compared to California's traditional Latin American heavy crude suppliers, possibly resulting in much of Canadian heavy sour crude being re-routed to tariff-free Asian markets.

For context, refineries on the US West Coast have been buying buying ~173,000 barrels a day of Canadian crude during the month of November.

By comparison, as much as an average of ~220,000 b/d has been shipped from Vancouver to Chinese refineries in that same time, accounting for the overwhelming majority of Canadian exports to Asia.

The only other major potential supplier of heavy sour crude is Venezuela, as even Saudi Arabia's sour heavy supply is limited.

The likely short term end result is temporarily cheaper crude supply in Asia and higher prices in the US, particularly in the Midwest where refineries are largely dependent on Albertan Canadian pipeline supply.

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