Latin American countries are cutting oil prices for U.S. Gulf Coast refineries in an effort to maintain their market share in light of a glut of more easily accessible oil from Canada, Bloomberg reports.
A system of pipelines carries oil to the Gulf Coast from Canada, and the new Seaway Twin pipeline will almost double the amount of heavy Canadian crude arriving to about 400,000 barrels a day in January. Latin American crude often comes to the U.S. via tanker. In Houston next month, Canadian crude will cost the same as Latin American Maya crude due to cheaper transportation, according to Bloomberg.
Mexican state-owned oil company Petroleos Mexicanos, or Pemex, will increase the discount it gives U.S. buyers from 90 cents a barrel in November to $3.70 a barrel next month.
Latin American countries are eager to keep their market share because the Gulf Coast is one of the only places worldwide equipped to process heavy crude.
Mexico sent 675,000 barrels of heavy crude a day to Gulf Coast refineries in September, down from 835,000 for that month in 2012. Venezuelan shipments fell to 700,000 from 900,000.
Market watchers expect Latin American countries to continue to drop their prices in order to remain competitive, John Auers, with a Dallas-based energy consulting firm, tells Bloomberg.
“[Latin American crude] won’t all disappear anytime soon,” he says, adding that the Gulf Coast “is the natural home for it.”
“U.S. refineries built out their capacity to run heavy barrels,” Auers says. “Refineries in the rest of the world aren’t built to run heavy barrels.” Bloomberg has the full story.
