Large volumes of foreign heavy oil reaching the Gulf Coast will give many U.S. refiners more choice after they have upgraded their systems to process cheaper, heavier crudes. The new supply also marks a breakthrough in Canada's years-long effort to bring its growing Alberta oil sands crude output to new markets.
Enbridge Inc's 600,000 bpd Flanagan South pipeline, which runs from Illinois down to the Cushing, Oklahoma, oil hub began commercial service on Dec. 1; Enterprise Product Partner announced that its 450,000 bpd Seaway Twin pipeline from Oklahoma to Freeport, Texas, shipped its first volumes on Dec. 21.
That promises another quantum leap for Canadian crude after its U.S. Gulf Coast sales already hit a record 274,000 bpd in October, nearly three times as much as a year earlier, according to U.S. data.
The new flows will compete with other crudes as well. Some refiners see Saudi's medium crude as a more direct substitute for Mexican and Venezuelan crudes.
However, some refiners are likely to blend oil sands crude with overabundant super-light U.S. condensate, creating medium blends that may rival Saudi Arabia's main grade, said Citi global commodities strategist Ed Morse. He warns the clash could set up another tumble in global prices.
