China has stopped buying crude oil from Western Canada after record purchase in 2018

April 8, 2019

Huntley told Postmedia News "my interpretation is that a significant amount of oil was sent to China near the end of 2018 when the price was very low, and it stopped the moment the Alberta Premier curtailed production and the price returned to normal."

Chinese demand for Canadian crude oil shipped through the Port of Vancouver has dried up in 2019.

David Huntley, a professor emeritus in physics at Simon Fraser University who monitors tanker traffic at Burnaby’s Westridge terminal, said that so far this year there had been only three tankers that loaded crude oil from the terminal and none went to China.

This followed a record year for China, where it bought 6.56 million barrels of crude (12 tanker loads), or almost one-third of all the crude shipped out of B.C. in 2018. According to Port of Vancouver records, China imported crude from B.C. every year between 2008 and 2018, except 2016 and 2017.

Huntley, via email, told Postmedia News “my interpretation is that a significant amount of oil was sent to China near the end of 2018 when the price was very low, and it stopped the moment the Alberta Premier curtailed production and the price returned to normal.”

On November 28, 2018, a barrel of Western Canadian Select sold for $10.29 a barrel, a huge discount on the $58.37 a barrel on May 18, 2018. Last week, a barrel of WCS sold for $53.75.

Kevin Birn, vice-president of IHS Markit in Calgary, agreed that price played a role in driving the demand for crude for Chinese refineries in the second half of 2018.

However, Birn said that securing available space on the Trans Mountain pipeline that ends at the Westridge terminal also played a role. The Canadian-government owned Trans Mountain pipeline carries a variety of petroleum products from Edmonton, with shippers bidding for space on the line.

“Everyone wants to fixate on whether it’s going to China, but it will go to Korea, it will go to Japan, to India, to California and the Gulf Coast. The shippers decide what gets pushed through the Trans Mountain pipeline by purchasing capacity on the line. They (Chinese shippers) just found a way to get (crude) capacity on the line,” Birn said.

The Westridge terminal is the westernmost point of the Trans Mountain pipeline, but half of its crude capacity is usually off-loaded at the Sumas Terminal and piped to refineries in Washington.

And while the Canadian government wants to double the capacity of the pipeline, records show the amount of crude oil being exported at Westridge has fallen since the peak in 2010.

Huntley’s records show the most tankers that have loaded up at Westridge since 2007 was 71, in 2010. The lowest number was 15 in 2016. In 2018 there were 43, of which 12 went to China.

He said that in total 17 tankers had gone to China since 2014.

Birn pointed out that the amount of crude exported from B.C. each year is a small percentage of the four million barrels a day that Alberta exports, mostly to the U.S.

He said that globally there are 100 million barrels of crude oil consumed each day. And of that, 10 million barrels a day are heavy sour crude like that produced in Alberta. This is bitumen with high sulphur content.

On any given day there are close to one billion barrels of crude oil in tankers at sea.

dcarrigg@postmedia.com

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