heavy sour

Western Canada’s heavy oil producers have become all too familiar with fluctuating and often very wide price discounts for their product. Too often, the culprits have been insufficient pipeline export capacity and/or rapidly rising production. It might be easy to quickly dismiss the latest widening of the heavy oil price discount as being related to these well-known factors, but it turns out that other more international trends are at work, ranging from U.S. government-backed competition in the Gulf Coast to heavy discounting of competing barrels in other far-flung regions of the world. In today’s RBN blog, we look beyond the borders of Canada for an explanation of the latest pressures driving wider Canadian heavy oil price discounts.

The U.S. Treasury Department last week announced new sanctions on Petróleos de Venezuela, S.A. (PDVSA), the national oil company of Venezuela, that effectively halts imports of Venezuelan crude oil into the U.S. Given that the Venezuelan crude imported to the U.S. is of the heavy sour variety, which is not produced in large amounts in the U.S. (except for California), certain refineries along the Gulf Coast are left scrambling to find alternative sources of feedstock for their facilities. Today, we evaluate historical crude oil imports from Venezuela, the refineries that are most heavily impacted, and the potential effects of the sanctions on U.S. refiners.