Canadian oil producers are exporting crude to the U.S. at record rates, Reuters has reported, adding that demand for the heavy, sour crude that Canada is producing is surging.
What's more, a growing amount of this crude is not staying at Gulf Coast refineries but is being exported to international markets. Kpler data cited by Reuters shows that the rate of Canadian heavy crude exports from the Gulf Coast topped 180,000 bpd last year, up from about 70,000 bpd in 2019 and 2020.
In December, export rates from the Gulf Coast reached 300,000 bpd. Most of this crude is going to India, China, and South Korea, replacing lost Venezuelan barrels.
Canada's oil sands production is also at record levels of 3.5 million bpd, according to the Reuters report. According to a Capital Economics expert, however, Canada's oil production is suffering from pipeline constraints.
"The oil sector is not the driver of GDP growth that it once was," Stephen Brown said in a note quoted by Bloomberg this week. "Due to pipeline capacity constraints, there is little supply response to rising prices, with oil production still stuck near 2018 levels. With export capacity out of their hands, producers have been using their income to pay down debt rather than invest."
"As there is little scope for an immediate supply response and it takes time for higher oil export earnings to feed through to the rest of the economy, for example, in the form of higher wages in the oil patch, there is a risk that higher oil prices initially have a modest negative impact on Canadian economic activity, by eating into consumers' real spending power," the economist also said.
The Canadian oil industry has been hard hit by canceled pipeline projects, but, as Reuters reports, Enbridge managed to expand the capacity of the Line 3 pipeline twofold last year. At the same time, the Capline Pipeline, which normally transports crude from Louisiana to Illinois, reversed flows last year to move more Canadian crude to the Gulf.
By Charles Kennedy for Oilprice.com
More Top Reads From Oilprice.com:
Charles is a writer for Oilprice.com More