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At least three tankers loaded with Canadian crude have headed to China since the start of the year, Bloomberg reports, citing shipping data. This is the latest sign of how the oil crisis is changing demand patterns.
The usual buyers of Canadian crude are U.S. refineries, but demand has been depressed in the United States. In China, however, it appears to be improving, benefiting the long-suffering Canadian oil industry. Oil sands producers had to shut in about 1 million bpd in oil production amid the latest price crisis, and the survival of some is questionable.
The federal government has had to step in with financial support, linking it, however, with climate change commitments. Even with these, the industry and the Alberta government welcomed the aid, which will be made available both for small and large oil companies.
“We know that the [financial] need could be great. We’ve seen some recovery in energy prices, that’s very welcome, but these prices that we’re seeing today are by no means close to profitable for the industry,” Alberta finance minister Travis Troews said, as quoted by Global News.
Canadian oil firms have been reducing spending and output at many heavy oil projects in Alberta, due to the unsustainably low oil prices and the demand crash in the COVID-19 pandemic. The cuts have worked: earlier this month, the local benchmark, Western Canadian Select, narrowed its discount to West Texas Intermediate to less than $4 a barrel, the smallest gap in 12 years. News about increased storage—by no less than 2 million barrels—also contributed to WCS’s improved performance relative to WTI.
Meanwhile, refineries in China are raising run rates as the country comes out of lockdown, and imports are on the rise once again. This seems to indicate a return to the growing demand for fuels, although there is worry overproduction could damage refiners’ bottom lines.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.