Eastern oil looks west for markets

Last year Irving Oil turned heads when it stepped away from its usual purchasing pattern and shipped Western Canadian crude to its St. John facility from the Trans Mountain terminal in Burnaby, B.C. Newfoundland is now doing something similar as it supplies oil from its Hibernia fields to fresh customers in the Western U.S.

According to reports, BP has shipped a tanker from Newfoundland to facilities in Washington while Chevron chartered a vessel to carry Hibernia oil to its site in California. Behind the move is a slowdown in traditional markets due to COVID-19 with Europe and Eastern Canada mired in lockdowns and COVID-19 related restrictions while the U.S. economy is currently moving forward with an expected opening this summer.

According to the Canadian Energy Regulator, Eastern-based refineries in Canada that use Newfoundland crude were running at 69% capacity. And, while this number is up from 58% a year earlier, it is still a long way from the 87% capacity refineries enjoyed pre-Pandemic in April of 2019. As a result of this decline in the eastern refinery market, as well as lower demand from European and North African buyers, the supply of oil in the Atlantic Basin has ballooned, necessitating the hunt for new markets beyond Gulf Coast and Eastern refineries.  

The Newfoundland cargoes, each about 600,000 barrels, are set to arrive on the West Coast in May. Analysts suggest both loads were discounted to account for the high cost of shipping through the Panama Canal.