The increase in tanker prices due to the Middle East crisis has led to the accumulation of heavy oil in North and South America. This logistical issue has created a surplus in the heavy oil market in these regions while Asia and Europe are facing a shortage of heavy oil.
Oil Production Status in North America
Canada, as one of the largest producers of heavy oil in the world, produces over 5 million barrels of oil daily, a significant portion of which is sent to U.S. refineries. About 4 million barrels of this daily production is sent south to U.S. refineries. Additionally, Venezuela's oil production has also been moving towards an increase following recent political changes.
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The Impact of Transportation Costs on the Oil Market
Transportation costs for tankers have reached unprecedented levels, leading to a decrease in demand for heavy oil in Canada, Colombia, and Ecuador. As a result, the price of heavy oil in these regions has dropped by an average of $10 per barrel in recent weeks. For example, the price of Western Canadian oil reached $74 per barrel and then increased to $79.50. Additionally, Ecuador's heavy oil, known as "Oriente," after dropping to $76, is now trading at over $84.
The price of Colombia's heavy oil, "Vasconia," has also reached $84 per barrel. Considering that the prices of Russian and Iranian light oils are approximately $120 and $104 per barrel respectively, the current prices of heavy oil in the U.S. market appear attractive; however, transportation and insurance costs have significantly impacted prices.
Overall, logistical issues and rising transportation costs due to a shortage of tankers have led to a decrease in demand for heavy oil in international markets. Given that many ships are currently engaged in the process of transferring oil from ship to ship in the Strait of Hormuz, it is expected that this situation will continue for some time.
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