Market Insight | Week 44

The recent expansion of Canada’s Trans Mountain Pipeline (TMX) is set to reshape the North American oil landscape, significantly impacting the tanker market and altering established oil flows. Nearly tripling the pipeline’s capacity, TMX has quickly become a key infrastructure asset for Canadian crude oil producers, providing greater access to international markets and reducing reliance on more traditional export routes. In October 2024, flows from the Port of Vancouver and the TMX pipeline reached an all-time high of 11.3 million barrels (mb), or 365,500 barrels per day (bpd), according to LSEG data. It is worth noting that prior to June, no more than 1.5 mb had been exported from the port in a single month. The expansion provides an important new outlet for oil produced in Alberta, a region long constrained by its landlocked geography.

The strategic importance of the TMX cannot be underestimated, especially given the changing dynamics of global energy supply and demand. US West Coast refineries, which have historically relied on imports from Saudi Arabia and other global suppliers, have begun to reduce their purchases from these markets in favor of Canadian oil. Indeed, according to the US Energy Information Administration (EIA), Saudi crude oil imports into the US reached a low of 13,000 bpd in the week ending 25 October. The expansion of the TMX has created an avenue for Canadian producers to gain market share on the West Coast and potentially further afield to key export destinations in Asia. The rise in Canadian crude imports on the US West Coast, which have reached record levels, has already forced a significant reduction in Saudi crude imports into the region, as noted above, disrupting existing oil flows and creating new realities.

From a tanker market perspective, the TMX expansion represents a shift in oil flow that has the potential to affect tanker dynamics on both the Pacific and Atlantic routes. With more Canadian crude going directly to export markets via the Pacific Coast, there is less reliance on overland and Gulf Coast shipping lanes. This rebalancing, combined with increased volumes flowing through the TMX, presents potential opportunities for the tanker sector, particularly in optimizing capacity on routes serving Asian markets.

In terms of the specifics of the trade, loading in the port of Vancouver is carried out exclusively by Aframax vessels. After loading, AIS tracking suggests that the vessels either head to US refineries in California or directly to Asia, to Chinese buyers. Another practice, exploiting economies of scale, is to load Aframaxes in Vancouver and then reload the cargo onto VLCCs bound for Asia.

This trend is supporting the utilization of Aframaxes and, to a lesser extent, VLCCs, but rates are not expected to follow, firstly because the trade is only a small percentage of the overall oil trade, and secondly because it also uses vessels for shorter distances, which has a negative impact on rates.

As the TMX pipeline continues to reshape North American oil flows, it is critical for players across the energy sector to adapt to these new dynamics.  The increased capacity not only provides new opportunities for Canadian crude oil exports, but also significantly alters the balance of supply for the US and Asian markets, while minimizing the need to source oil from further afield. While this development may be good for energy security, it also poses challenges for the tanker market.