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Mexico’s U.S. Oil Sales Benefit From Canadian Outage, OPEC Cuts

As some supply disruption from Canada’s heavy crude oil supply to the U.S. is coinciding with reduced shipment to the U.S. from OPEC, analysts say that Gulf Coast refineries are expected to buy this month as much Mexican crude as they can, because higher Canadian crude prices make the similar Mexican grade cheaper and therefore more attractive.

According to Bloomberg, Syncrude Canada has advised customers that they would not get any April supply from the 350,000-bpd upgrader that turns bitumen from the oil sands into light synthetic crude. Following a fire at the upgrader last month, Syncrude Canada has moved forward its maintenance activities, people familiar with the matter told Bloomberg.

The Western Canadian Select grade was trading at a discount of $4.117 per barrel to Mexico’s similar Maya grade on Monday, the smallest discount since the May 2016 wildfires in Alberta, Bloomberg’s figures show. The small spread with the Mexican grade is too uneconomical to cover the $7 per barrel cost to send heavy Canadian crude to the Gulf via pipeline, Carl Evans, an analyst at Genscape Inc, told Bloomberg.

Probably the Gulf will take as much Mexican as it can,” Evans noted.

The price of Western Canadian Select also jumped to the lowest discount to WTI - $10.50 – in nearly two years, according to Bloomberg data.

U.S. imports of Mexican crude oil have been dropping since 2010, and halved from 1.152 million bpd in 2010 to 582,000 bpd in 2016, data by the EIA shows.

U.S. imports from Canada, on the other hand, jumped from 1.970 million bpd in 2010 to 3.256 million bpd in 2016, with new pipeline capacity opening up.

Related: Putin Says Russia Will Become World’s Top LNG Producer

The U.S. energy trade with Canada accounted for about 5 percent of the value of all U.S. exports to Canada and more than 19 percent of the value of all U.S. imports from Canada in 2016, according to EIA data from last month. For 2016, the value of U.S. energy imports from Canada was $53 billion, while the value of U.S. energy exports to Canada was $14 billion.

By Tsvetana Paraskova for Oilprice.com

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