Canadian oil is fetching a premium in Asian markets as geopolitical tensions in the Middle East disrupt traditional supply chains. Specifically, the ongoing conflict and uncertainty around Iran’s oil exports have prompted Chinese buyers to seek alternative sources, leading to increased demand for Canadian crude. According to Patrick O’Rourke, managing director of ATB Cormark Capital Markets, Canadian oil now has a $US2 to $US3 advantage due to increased tanker charter rates and higher insurance premiums in the Middle East.
Heavy crude shipped via the Trans Mountain pipeline to China traded at an 80-cent premium to ICE Brent on Monday. This marks the first time such a premium has been observed since Argus Media began tracking the price in September 2024. The increased demand highlights the strategic importance of Canadian oil reserves as a stable and reliable alternative for energy-importing nations like China.
Shipping reports compiled by Bloomberg indicate a surge in bookings to transport crude from Alberta’s oil sands to China. In the past two weeks, at least five ships have been preliminarily booked by companies including Unipec America, Shell, and Exxon Mobil to deliver Alberta’s oil. These bookings indicate that shippers are prepared to pay higher spot prices to secure oil supplies.
The cost of shipping Trans Mountain oil has risen sharply, climbing over 70 per cent since the beginning of the month. Bloomberg calculations show that transporting oil via Trans Mountain now costs approximately $US10 per barrel, a significant increase from the $US5.80 earlier this month, reflecting the heightened demand and logistical challenges in the current market environment.
