US west coast refiners have increased heavy Canadian crude purchases by almost 75pc since the 590,000 b/d Trans Mountain Expansion (TMX) pipeline started operations in May, but imminent California refinery closures threaten demand.
The 590,000 b/d TMX project nearly tripled the capacity of Trans Mountain's pipeline system to 890,000 b/d when it opened on 1 May. The line runs from Alberta's oil sands to Vancouver on Canada's west coast, giving direct access to lucrative Asian markets, where buyers are eager for heavy sour crude.
About 305,000 b/d of mostly heavy sour Canadian crude has loaded at the Westridge terminal in Vancouver in the six months since the pipeline made its debut, according to analytics firm Vortexa, hitting a record of nearly 415,000 b/d in October (see graph). US west coast refiners received just over 150,000 b/d during this period, up from less than 40,000 b/d a year earlier, and deliveries rose to a high of nearly 205,000 b/d last month (see graph). Most TMX crude destined for the US west coast has gone to Californian refiners, with Marathon, Chevron and Phillips 66 emerging as consistent buyers.
Proximity to Vancouver and cheaper prices are attracting west coast buyers to TMX grades. The voyage time to California takes four days, compared with 10-14 days for Ecuadorean grades and over a month for Saudi crude.
The new flows have undermined west coast interest in Mideast Gulf and Latin American supply. West coast imports from the Mideast Gulf fell by 25pc on the year to just under 260,000 b/d in the first six months of TMX operations, Vortexa data show. Crude arrivals from Saudi Arabia have been hardest hit, falling to only 40,000 b/d over the period, a third of the 2023 amount.
Refiners are also turning away from Latin American grades. Mexican crude imports have dropped by 65pc since TMX started up, while imports of Ecuadorean heavy sour Napo and Oriente have fallen by 14pc.
Napo differentials have weakened as a result, dropping to a $9.70/bl discount to Nymex WTI for October from a $6.70/bl discount for May. Oriente fell by $1.20/bl to a $5.70/bl discount to WTI between May and October.
Alaskan ANS differentials have also come under pressure. December-delivery ANS averaged a $1.09/bl premium to Ice calendar-month average Brent, down from $4.30/bl a year earlier (see graph). But that drop has bolstered west coast demand for Alaskan crude, and spot ANS sales to the region rose by 8pc on the year to 1.6mn bl in May-December, Argus data show.
Lower-priced ANS is also attracting interest from further afield — almost 1.2mn bl loaded for delivery to China in September, the highest such flows since April 2021, according to Vortexa.
Rising tide
Canadian crude remains plentifully supplied to refiners in the US midcontinent, despite earlier concerns that the TMX line would constrain availabilities. Rising Canadian oil sands output has meant that Enbridge's 3.1mn b/d Mainline system from west Canada to the US midcontinent has been operating at full capacity, and 2.9mn b/d flowed to the region in July, the highest for the month since 1993, US EIA data show. August imports fell to 2.6mn b/d after wildfires limited production in Canada's key upstream province Alberta.
West coast demand for TMX crude could be undermined over the longer term by refinery closures. Phillips 66 aims to shut its 139,000 b/d Los Angeles refinery in late 2025. US west coast operators say more plants will close after then, citing a "hostile regulatory environment" in California and increased costs as the state government tightens the regulations governing refineries and production.
