“The Atlantic Basin imbalance and continued lockdowns in Canada are creating a temporary crude market dislocation,” said Zachary Rogers, director for Global Oil Service at Rapidan Energy Group. “Even faraway refiners would buy it at the right differential.”
The Newfoundland cargoes, each about 600,000 barrels, are set to arrive on the West Coast in May. California, the nation’s most populous state, is on a path to reopening and is expected to drop most virus restrictions this summer. In the past, oil exports from the province to the U.S. have targeted the East Coast and Gulf Coast, according to Statistics Canada.
Meanwhile, inventories are ballooning in the Atlantic Basin where West African and North Sea sellers are facing unusually weak demand from their typical buyers in Europe and Asia. In addition to lockdown measures, consumption is also weak with seasonal maintenance taking place at refineries.
“East Canadian oil is traveling to further to find a home,” said Randy Giveans, senior vice president of Equity Research for Energy Maritime at Jefferies LLC. The long trip, which is expected to include transiting the Panama Canal, isn’t cheap and sellers would have discounted prices to offset the extra cost, he said.
BP said it does not comment on its day-to-day operations.