Exports of Canadian heavy crude from Vancouver, British Colombia, increased in November to an all-time high because of rising Canadian production and favorable pipeline arbitrage economics.
Total waterborne exports out of the 890,000 b/d Trans Mountain pipeline system averaged 547,000 b/d in November, eclipsing the prior record of 528,000 b/d in March, according to Kpler and Vessel Tracker data. Heavy crude loadings accounted for 522,000 b/d of November's total, surpassing the previous record of 442,000 b/d in October. The remaining 5pc of exports were synthetic and light Canadian crudes.
November-loading supply of Canadian crude received support from peaking seasonal production in Canada during the colder months, and an open shipping arbitrage from Edmonton, Alberta, to the Westridge terminal in British Colombia. Canadian crude and condensate production is forecast to average a record 4.87mn b/d in the fourth quarter, according to Argus Consulting, a division of Argus Media.
Canadian pipeline operator Enbridge rejected 4pc of November heavy crude nominations and 6pc of light nominations on its 3.1mn b/d Mainline due to strong US demand for Canadian crude.
In September, when most November cargoes would have changed hands, prompt CMA WTI Nymex traded on average at a 79¢/bl premium to March CMA Nymex futures. The backwardated market pushed the growing volume of Canadian production to the Trans Mountain system for export, rather than into storage.
Western Canadian Select at Hardisty, Alberta, traded for the November trade month on average at an $8.10/bl discount to November nomination low-TAN Cold Lake fob Vancouver, according to Argus pricing, indicating that sending cargoes to Westridge was lucrative for shippers with the longest and largest volume commitments on Trans Mountain. The tolls for committed shippers to send heavy crude on the Trans Mountain line range from $7.71-9.11/bl, depending on the length and size of shippers' commitments.
But the arbitrage may be less important when the Mainline is fully apportioned, with market participants in a backwardated market more focused on getting barrels exported, rather than using the most profitable export route.
China was the largest destination for Trans Mountain cargoes in November, all of which were heavy sour cargoes and most high-TAN, with loadings rising by 15pc to a record 442,000 b/d. Chinese demand for November-loading heavy Canadian crude was strong because it was one of the most competitively priced options into China for the cycle, market sources said.
The remaining 106,000 b/d headed to the US west coast, including all the waterborne synthetic and light crudes and four Cold Lake shipments. Phillips 66 ceased crude processing at its 139,000 b/d Los Angeles refinery in October, pressuring demand for Canadian crude in the US west coast. The refinery imported 12 cargoes of Canadian crude over January-September this year, according to EIA data.
