Canadian crude oil is crucial for US oil refineries, now representing the majority of US imports.
As of January 1, 2024, US refining capacity was 18.4 million barrels per day (b/d).
In 2023, 60% of US crude oil imports came from Canada, up from 33% in 2013.
According to EIA, Canadian crude oil production has surged, leading to increased exports to the US.
Between 2013 and 2023, Canadian imports to the US grew by an average of 4% annually.
By 2023, Canadian crude made up 24% of US refinery output, up from 17% in 2013.
Canada's crude oil production averaged 4.6 million b/d in 2023, nearly triple its refining capacity of 1.7 million b/d.
Many US refineries are designed to handle heavy oils from Canada's oil sands, used to make fuels, chemicals, and plastics.
Geographic proximity allows efficient transport of Canadian crude from Alberta to US refineries, especially in the Midwest (PADD 2) and the Rockies (PADD 4), with additional capacity for Gulf Coast shipments (PADD 3).
Pipeline infrastructure has expanded, notably the Express pipeline's increase to 310,000 b/d in 2020 and the Trans Mountain Expansion (TMX) in 2024, boosting capacity to 890,000 b/d. These expansions aim to ease bottlenecks and enhance market access for Canadian producers.
Despite improvements, Western Canadian Select (WCS) crude remains cheaper than West Texas Intermediate (WTI) due to its heavier nature, requiring more processing.
How is the Trans Mountain pipeline expansion going vs. heavy Canadian crude oil prices?
The expansion of the Trans Mountain (TMX) pipeline, intended to reduce the discount of Canadian oil compared to US crude, has not achieved its goal.
Despite adding 590,000 barrels per day (bpd) of export capacity, the price differential between Western Canada Select (WCS) and West Texas Intermediate (WTI) crude has widened, with WCS trading around $15 per barrel below WTI, up from a $11.75 differential when TMX began operations.
Analysts had predicted the price gap would narrow due to increased pipeline capacity, but several factors have prevented this. Increased competition on the US Gulf Coast for heavy crude imports from Mexico and refinery shutdowns, such as ExxonMobil’s plant in Joliet, Illinois, have impacted prices.
These issues have kept Canadian oil prices lower despite the added pipeline capacity.
Oil companies remain hopeful that the WCS discount will narrow in the coming months, reported Reuters.
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