Analysis of pipeline flows, highlighted in ESAI Energy’s recent North America Watch, found that more Canadian crude oil will be directed to the US Gulf Coast (USGC) over the coming year as new pipeline capacity comes online helping offset some of the downward price pressure of relatively strong oilsands production growth.
ESAI Energy reports that additional pipeline egress will accommodate annual production growth of around 350 000 bpd from Alberta in 2021. The 390 000 bpd Line 3 Replacement in 4Q21 will deliver Canadian barrels to the US Midwest and to expanded connections to the USGC. Additionally, the long-awaited reversal of the Capline will likely take Canadian crude from Patoka, Illinois to refining markets in Louisiana once it starts in early 2022, shown in the map below.
At Cushing, Oklahoma, ESAI Energy sees continued price support for WTI as changes in pipeline flows and lower production from the Niobrara and Bakken shale basins means further draws on crude stocks into 2022, as shown in the chart below. Additionally, ESAI Energy sees less Permian crude going to Cushing as new pipelines from West Texas are aimed at reaching export markets at the USGC. Elisabeth Murphy, Upstream Analyst at ESAI Energy explains that “as contracts roll-off older pipelines, especially those to Cushing, more Permian crude will be directed to the USGC, enhanced by low tariffs and higher netbacks. Foreign demand for US exports held up remarkably well in 2020, and looks to remain strong in the coming year.”
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