Breaking News: Canadian Crude Pipelines Cut Rates Amid Trans Mountain Competition
By Arathy Somasekhar
In a recent development, pipelines that traditionally transport Canadian crude to the U.S. are slashing rates and exploring options to ship different grades due to increased competition from the newly expanded Trans Mountain pipeline. This move will result in a temporary reduction in the transportation costs of some of Canada's heavy crude to the U.S. Midwest and Gulf Coast next month.
The surge in U.S. imports of Canadian crude in July, thanks to the growing volumes from the Trans Mountain expansion, has prompted Canadian pipeline operator Enbridge to announce an 11% tariff cut for heavy crude moving on its Mainline system to the U.S. Gulf Coast in September. This decision comes as Enbridge expects the Mainline to be well-utilized for the rest of the year, attributing the decrease in volumes to routine oil producer and refiner maintenance.
As a result of the increased activity on the Trans Mountain pipeline, Enbridge's Spearhead and Flanagan South pipelines could potentially lose volumes, while the Seaway pipeline may experience lower flows. Additionally, pipelines like MPLX's Capline are expected to transport more light crude from the Bakken oilfield in North Dakota to compensate for the decline in Canadian heavy grades.
Despite the short-term impact on rival pipelines, delays in the completion of the Trans Mountain expansion have allowed Canadian producers to increase supply, with overall utilization on outbound pipelines rising. Analysts predict a 500,000 bpd increase in oil output by 2025, offsetting the additional capacity brought by the Trans Mountain expansion.
In conclusion, the dynamics in the Canadian crude transportation industry are shifting due to the competition from the Trans Mountain pipeline. Investors and stakeholders in the energy sector should closely monitor these developments as they could have significant implications for oil prices, pipeline operators, and overall market trends in the coming years.