With the recent shift in Canadian pipeline flows, refineries along the U.S. Gulf Coast are increasingly turning to heavy crude oil from Latin America.

Mexico’s state-owned petroleum company Pemex recently purchased Colombian crude for its Texas refinery, while US-based Valero Energy has received Colombian petroleum grades typically exported to India and China.

Fuel producers in North America are facing a supply squeeze, as the expanded Trans Mountain pipeline redirects Canadian crude mostly to the Pacific Coast. Market insiders, who preferred to remain anonymous, noted that Pemex is also retaining more of its Mexican crude for the startup of its new Dos Bocas refinery.

According to Argus market data, in recent weeks, some Latin American crude grades usually shipped to California have been redirected to the Gulf Coast.

The Trans Mountain pipeline expansion has boosted Canadian crude prices, making similar-quality Latin American petroleum more appealing. For instance, Canada’s heavy Cold Lake crude—frequently used by Gulf Coast fuel producers—was priced $4.80 per barrel below the benchmark West Texas Intermediate (WTI) this past Tuesday, down from a $7.40 discount the previous year.

U.S. Energy Information Administration (EIA) data indicates that since the Trans Mountain pipeline expansion, Gulf Coast refineries imported an average of 485,000 barrels of Canadian crude per day between May and July, the lowest level for this period since 2018.

Bloomberg reports that since April, Pemex has purchased three shipments of Colombian petroleum for its Deer Park refinery in Texas. Meanwhile, Valero has acquired Colombia’s Mars and Apiay crude grades, which are typically exported to Asia.

BY WPB