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CALGARY – A fight between Canadian and Saudi Arabian oil producers is expected to play out on the U.S. Gulf Coast during the course of this year, as the two countries battle for market share in the world’s largest refining district. The fight could help keep oil prices depressed for another six months.
Citigroup analyst Edward Morse released a report Monday that points to an oversupply of oil on the Gulf Coast thanks in part to an influx of heavy crude from Canada, even without TransCanada Corp.’s long-delayed Keystone XL pipeline. At the same time, the report says Saudi Arabia is attempting to regain its market share in the area.
The 2014 showdown between light oil producers — U.S. shale oil companies and OPEC members such as Saudi Arabia — for share of the North American refining market will change, according to Citigroup. “Now the confrontation should shift to sourer and heavier crudes,” the report said.
Oilsands crude is considered heavy, because it has the consistency of molasses, and sour, because of its sulphur content.
Scotiabank vice-president and commodity market specialist Patricia Mohr agreed there is potential for Canadian oilsands shipments to push Saudi Arabian and North African oil out of refineries on the Texas and Louisiana coastline.
“Refiners still have a big need for additional volumes of heavy crude and so it’ll be more of the light-sweet or light sour crudes that would be displaced,” Ms. Mohr said in a telephone interview.
Canadian pipeline companies, including TransCanada Corp. with its long-delayed Keystone XL pipeline and Enridge Inc. with a number of projects, have been working to expand their network to allow oilsands producers to ship their crude oil to the Gulf Coast, where there’s a network of 50 refineries with the capacity to process 9.4 million barrels of oil per day.
“One part of the struggle for sour crudes will come from the first of many waves of Canadian crude oil capable of reaching the U.S. Gulf Coast by pipeline in significant quantity for the first time,” the Citigroup report said.
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