US restrictions on Canada’s oil pipeline may benefit tanker shipping

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Recent US moves to restrict pipeline imports of Canada’s crude oil may benefit the tanker shipping market, as the Canadian crude will be finding other outlets via sea transportation to Asia or the US Gulf, according to Poten & Partners.

One of the first executive orders of new US President Joe Biden was to block the Canada-US Keystone XL pipeline by withdrawing the permit for the project. In addition to Keystone XL, several other cross-border pipelines have been under scrutiny for closure to limit Canada’s crude oil exports into the US.

As a result of the shale boom, the US is awash in domestic crude oil and there is little or no need for additional supplies from Canada at the moment, analyst Poten & Partners wrote in its recent report.

Canadian producers, on the other hand, are facing growing challenges bringing their crude oil to the market.

“The policies of the Biden administration towards the fossil fuel industry and their focus on addressing climate change means that most of the additional production out of Canada will be headed for the export markets outside of the US,” Poten & Partners stated.

Asian markets, in particular China, can be reached via shipments through the Trans Mountain pipeline, expanded to 890,000 barrels per day (bpd) when completed by the end of 2022.

Another outlet for Canadian crude would be the US Gulf. Plans to reverse the flow of the Capline pipeline will give Canadian crude greater access to refiners and export terminals along the Gulf Coast, with initial capacity being 300,000 bpd.

“Exports from there could also target Asia (on VLCCs) and/or Europe (on aframaxes/suezmaxes). Chances are that the tanker industry will benefit from more Canadian crude, one way or another,” the analyst said.

Canadian oil production reached 5.8m bpd in December 2019. The Energy Information Administration (EIA) estimates that Canadian production is expected to exceed 2019 levels in 2022.

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