High Noon on the Gulf Coast: Canada, Saudi oil set for showdown

(Reuters) – As a test of wills between OPEC nations and U.S. shale drillers fuels a global oil market slump, a brewing battle between Canadian and Saudi Arabia heavy crudes for America’s Gulf Coast refinery market threatens to drive prices even lower.

While the stand-off between the oil cartel and U.S. producers of light, sweet shale oil has captured the limelight in recent months, the clash over heavier grades – playing out in the shadowy, opaque physical market – may put even more pressure on global prices that have halved since mid-2014.

Two factors will come into play over the next few weeks: From the North, new oil pipelines will pump record volumes of Canadian crude to the southern refineries, many better equipped to process heavy crudes than lighter shale oil.

From the Middle East, top exporter Saudi Arabia is offering crude at discounted prices in an attempt to defend its remaining share of the important regional market, which has shrunk by more than half in recent months…

…The looming clash of barrels comes at a time when oil markets already face a global glut expected to last for a year or longer.

Large volumes of foreign heavy oil reaching the Gulf Coast will give many U.S. refiners more choice after they have upgraded their systems to process cheaper, heavier crudes. The new supply also marks a breakthrough in Canada’s years-long effort to bring its growing Alberta oil sands crude output to new markets…

  • Now I know why Obama wants to veto the XL Pipeline – it’s a favour to the Saudis.

    • He’s a muslim. Just what you’d expect.

    • Clausewitz

      On Obama’s first apology road trip his first action was to go bow before the Saudi Princes. Prior to him “NO” American President ever bowed before any leader from another country. Wonder why his school records are closed to the public? Be interesting to see who paid for his education, and who paid so that this idiot would get passing grades in his studies.

      • Ron MacDonald

        His school records are closed because they will show he attended as a foreign student.

        • Clausewitz

          A little of column A, a little of column B. We’re probably both right.

      • WalterBannon

        well to be fair, I think Obama was just performing an act of fellatio, his preferred way of greeting men he likes…

        • MRHapla

          instinctive goto move

      • MRHapla

        and to show what he ‘studied’

    • Frau Katze

      He’ll do it.

    • barryjr

      You are away ahead of me I read this article elsewhere a couple hours ago and the little light bulb finally went on in my head. What I would like to know is, what do the Saudis have on Obama?

    • Frau Katze

      Despite the conspiracy theories, it’s pretty clear that Russia and Venezuela are collateral damage.

      Not sure about Iran. Saudi may enjoy inflicting some pain there.

    • eMan14

      It does make some sense.

  • WalterBannon

    I suggest Canada use nuclear diplomacy to solve this – i.e. drop a few nukes on Saudi Arabia and then say “sorry, my bad”.

  • Maggat

    Interesting, Saudi getting into a bind with dropping prices and Canada pushing that. Add ISIS suicide bombers on Saudi’s doorstep, starting to look good on those useless towel heads.

    • MRHapla

      file that under chickens: coming home to roost

  • Norman_In_New_York

    Wall Street is in a panic over falling oil prices. Us ordinary folk saving thousands of dollars on goods and services – oh, the horror!

    • Brett_McS

      Yes, I can see an upside!

      • MRHapla

        on Wall St. there is always an upside, and those guys plan for it,,,options markets