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Inconvenient Time for Canadian Crude: US Gulf Coast Is Glutted
06/14/2022![Inconvenient-Time-for-Canadian-Crude-US-Gulf-Coast-is-Glutted](https://images2.rextag.com/public/blog/70blog_Canadian_Crude_transporting_pipelines_map_06_2022.png)
Canadian heavy crude, being deeply discounted for several years due to a lack of pipelines, is eventually trading like a “North American” grade, moving in tandem with U.S. sour crudes sold on the Gulf Coast thanks to Enbridge’s expansion of its Line 3 pipeline late last year.
Meanwhile, the Gulf is full of sour crude over Washington’s largest-ever release from the Strategic Petroleum Reserve (SPR) that will amount to 180 MMbbl during six months, trying to tame exorbitant fuel prices after the start of the conflict in Ukraine.
The market is flooded with millions of barrels of sour crude from storage caverns in Louisiana and Texas. At the world’s biggest heavy crude refining center, U.S. Gulf Coast, heavy grades like Mars and Poseidon are languishing.
The discount in July for Western Canada Select (WCS) delivery in the Hardisty crude hub reached more than $20 a barrel below the WTI benchmark last week, the widest since early 2020, as WCS sold more than 3,000 km (nearly 2,000 miles) away in Hardisty, Alberta, is getting dragged down with them.
However, the undermining of the sour Gulf surplus is expected to be a period of stronger WCS demand in Hardisty, as maintenance on oil sands projects decreases supply and as U.S. refineries exit turnarounds.
Some analysts suppose that other factors resulting in the WCS discount widening include the high price of natural gas, which escalates the cost of refining heavy crude and risen demand for lighter products like gasoline.
According to U.S. Energy Information Administration (EIA) data, Canada exports around 4.3 MMbbl/d to the United States, whereas until last year demand to ship crude on export pipelines increased capacity, leaving barrels bottlenecked in Hardisty.
In 2018, the discount on WCS in Hardisty blew out to more than $40 a barrel, prompting the Alberta government to restrict output. Meanwhile, now there is sufficient pipeline capacity and WCS trades at approximately the same level as comparable crudes like Mexico's Maya. Canadian producers get that value, minus the spot pipeline tariff to the U.S. Gulf Coast, which is roughly $10 a barrel.
The EIA forecasts that Canadian production will increase 200,000 bbl/d by the end of 2022. Unfortunately, that could trigger bottlenecks to re-emerge until the Trans Mountain pipeline expansion to Canada's Pacific coast is completed in 2023, adding 600,000 bbl/d of capacity.
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Crude Pipelines Infrastructure Developing at Enbridge Ingleside Energy Center
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/63Blog_Enbridge_Ingleside_Energy_Center_pipelines_2022.png)
The joint project to improve and market a low-carbon hydrogen and ammonia production and export facility was presented on May, 6 by Enbridge Inc. and Humble Midstream LLC. Deployment of the facility is taken under the Enbridge Ingleside Energy Center (EIEC) basis close by Corpus Christi. Being the premier export facility on the U.S. Gulf Coast, the EIEC plays a vital role in world energy security and sustainability. Companies plan to develop a utility-scale efficiently low carbon production facility, able to combine both low-carbon hydrogen and ammonia to meet the growing global and domestic demand. It is expected to sequester up to 95% of CO2 generated in the production process in carbon capture facilities, especially ones owned and operated by Enbridge which makes this process a fully integrated low-carbon solution.
Growing Export of US Crude Oil Is Expected to Set Record This Quarter
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/80Blog_Top_Gulf_Coast_Crude_Terminals_2022_07.png)
On 27 June, the analysts at Kpler spread the word that the exports of crude oil from the U.S. Gulf Coast could break a record 3.3 MMbbl/d this quarter as Europe has regard to U.S. crude which can outweigh sanctioned Russian oil. Due to Washington's decision to release 180 MMbbl of oil from the nation's Strategic Petroleum Reserve, U.S. exports have increased in the last three months, as it has flooded the domestic market. Exports to Europe are anticipated averaging approximately 1.4 MMbbl/d this quarter, about 30% higher than the year-ago quarter, meanwhile, export to Asia is set to decrease to less than 1 MMbbl/d. Despite that the U.S. has lost about 1 MMbbl/d of refining capacity since 2020, it also boosted exports thanks to the government’s intervention to back crude supplies which has had consequences in growth in exports. Throughput via the Port of Corpus Christi has grown by more than 150,000 bbl/d and has become 1.86 MMbbl/d. Nevertheless, Port of Houston exports also have been increasing since the third quarter of last year, they remain below pre-pandemic levels.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/282_Blog_Renewable Natural Gas How RNG Changes the Industry.jpg)
The renewable natural gas (RNG) industry in the United States is showing promising signs of growth. As of 2019, the U.S. consumed 261 billion cubic feet (BCF) of RNG, primarily utilized by independent power producers, electric utilities, and various commercial and industrial entities. However, this figure represents only a small fraction of its potential. Research indicates that the U.S. could theoretically produce up to 2,200 BCF of RNG through anaerobic digestion alone, which would equate to about 11% of daily national natural gas consumption.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/295_Blog_Renewable Efforts Lag as Global Oil and Gas Demand Continues to Rise.jpg)
Recently, the progress toward an energy transition is hitting a snag. Sales of electric vehicles are decelerating, and the growth in wind and solar power needs to be keeping pace with expectations. To make matters more challenging, electricity prices are climbing when they were expected to fall. Amidst these setbacks, the oil and gas sectors are proving resilient. According to BP's latest energy outlook, not only are these energy mainstays here to stay, but their demand is expected to remain relatively high even after reaching a peak. Interestingly, BP forecasts that oil demand will reach its zenith next year, marking a critical moment in energy consumption trends. This isn't the first time BP has projected a peak in oil demand. Back in 2019, their review anticipated a decline in demand growth, but the prediction fell flat. Instead, oil demand surged to unprecedented levels following the end of the global pandemic lockdowns, defying previous forecasts and underscoring the enduring dominance of traditional energy sources in the global market.