July 2019, Vol. 246, No. 7
Global News
Canadian Oil Pipeline Congestion Sets up Lucrative Storage Play
Upheavals in the Canadian crude market are providing unique opportunities for firms with sizeable long-term leases on Alberta storage tanks, a cluster that sources say includes Mercuria Energy Group and oil major BP Plc’s trading arm.
Canada holds the world’s third-largest crude reserves, but years of delay in building new pipelines has led to oil production outpacing takeaway capacity. A glut of crude has thus been created, increasing demand for storage tanks in the oil sands province of Alberta, which this year introduced production cuts to deal with the oversupply.
The opportunity for traders comes from monthly pipeline “apportionment”, when demand to ship crude on certain pipelines exceeds capacity, forcing pipeline operators to ration the number of barrels each shipper can move.
The practice is a long-standing source of frustration for Canadian producers but offers a lucrative, though risky, play for traders able to swoop in and capitalize on post-apportionment price volatility.
Bulging storage tanks are contributing to high apportionment on Canada’s main conduit to the United States, the 2.85 million barrel-per-day (bpd) Enbridge Mainline network. P&GJ
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