Cheap Canadian Oil Displaces Iraqi Imports on US West Coast

(Bloomberg) -- US West Coast refiners are replacing their heavy Iraqi oil imports with cheaper crude from Canada as the newly expanded Trans Mountain pipeline reshuffles trade flows across the Pacific.

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California and Washington are set to import about 150,000 barrels a day of Canadian crude by tanker in June — a seven-fold increase from average volumes, according to preliminary Vortexa data. At the same time, imports of Iraq’s Basrah Heavy crude are poised to plunge to just 3,587 barrels a day from 76,000 barrels in May.

The Trans Mountain expansion, which started up in May, can bring 590,000 barrels a day of crude from Canada’s oil sands to Vancouver for export. That’s potentially a boon for refiners on the US West Coast, who would otherwise pay several dollars per barrel more for Iraqi crude. The trade flow also signals that the US will, for now, remain a dominant buyer of Canadian oil, even as the pipeline gives producers access to coveted Asia markets.

While Trans Mountain still isn’t running at full capacity, the company expects 22 tankers to ship crude from Vancouver this month. More than 81,000 barrels a day are heading to China. Another 50,000 barrels a day is going to India, the first such movement off Canada’s Pacific Coast.

As Canadian imports to the US West Coast rise, shipments of medium, low-sulfur Brazilian oil Tupi are falling along with Basrah Heavy. The benchmark heavy Western Canadian Select in Alberta trades at a discount to US benchmark West Texas Intermediate of about $13 a barrel in Alberta, or about $67 a barrel, according to General Index pricing on Bloomberg. Basrah Heavy trades at $5.55 discount to dated Brent, or more than $80 a barrel.

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