Imports of Canadian heavy crude are an increasingly important source of supply to the United States, the world’s largest refining market for such crudes, according to a new report by IHS Markit.
U.S. imports of Canadian heavy crudes will approach 2.8 million bbls/d in 2018 — more than double what they were in 2012 — and could exceed 3 million bbls/d in 2020, the report said.
However, IHS Markit said consolidation in the oilsands industry and lagging infrastructure is expected to slow growth in the coming years and may be a source of uncertainty for U.S. heavy oil demand in the longer term.
“The effect of Canada’s expanding market share has been to shore up the U.S. heavy oil market,” IHS Markit director Vijay Muralidharan said in a statement.
“Absent Canadian supply, heavy oil may otherwise be more scarce and expensive.”
The U.S. is by far the world’s largest refining market for heavy oil, processing more than half of all that type of crude globally in 2018, according to the report.
That capability is the result of investments by U.S. refiners over the past 20 years to process heavier grades of crude, which made the refining sector more flexible and competitive.
Unlike lighter crudes — where the boom in U.S. tight oil production has backed out nearly all offshore imports — U.S. demand for and import of heavy crude oil has continued, according to the report.
“The relative importance of Canadian heavy oil to the U.S. market has increased and will continue to do so,” IHS Markit vice-president Kevin Birn said in a statement.
“The United States will import more than 3.6 million bbls/d of crude from Canada in 2018, more than the combined imports from all of OPEC. And most of those imports, about four-fifths, will be heavy oil.”
Canada has met a growing portion of U.S. heavy oil demand as other traditional sources of U.S. supply for that type of crude—such as Mexico and Venezuela—have fallen in recent years, IHS Markit said. It has become the largest producer of heavy crude oil in the world and, over the past few years, the only source of significant production growth of heavy crude globally.
The growing supply of Canadian heavy oil, which increased 1.1 million bbls/d from 2012 to 2017, has managed to offset most of the contraction in heavy oil supply elsewhere to date, the report said.