Weight of Freight: TMX spurs new Aframax, VLCC trade in Pacific basin
The first three months of Canada's Trans Mountain Expansion (TMX) have sent a surge of crude to refiners in California and China, shifting tanker demand in the Pacific basin.
The 590,000 b/d TMX project nearly tripled the capacity of Trans Mountain’s pipeline system to 890,000 b/d when it opened on 1 May, linking Alberta's oil sands to Canada's west coast for direct access to lucrative Pacific Rim markets, where buyers are eager for heavy sour crude.
Between 20 May, when the first TMX cargo began loading, and 20 August, about 165,000 b/d of Vancouver crude exports landed at ports on the US west coast, primarily in California, up from about 30,000 b/d in that same span last year, according to data from analytics firm Kpler.
The freight rate for a Vancouver-US west coast Aframax shipment averaged $1.98/bl for Cold Lake between 1 May and 20 August. This ranged from a low of $1.50/bl from 1-3 May when shipowners repositioned to the region in anticipation of TMX to a high of $2.32/bl from 13-14 June, according to Argus data.
The new oil flow into the US west coast has displaced shipments from farther afield in Ecuador and Saudi Arabia. Crude exports from those countries into the US west coast averaged 110,000 b/d and 25,000 b/d, respectively, between 20 May and 20 August, down from 155,000 b/d and 135,000 b/d over the same stretch in 2023, according to Kpler.
The growth of the Vancouver market, which benefits from its proximity to California, has reduced tonne-miles, a proxy for tanker demand, into the US west coast. This has outpaced slightly lower crude demand, which fell in part due to Phillips 66 halting crude runs at its 115,000 b/d refinery in Rodeo, California, in February to produce renewable fuels, as well as weaker-than-expected road fuel demand this summer.
Tonne-miles for US west coast crude imports fell by 14pc to 106bn between 20 May and 20 August 2024 compared with the same period a year earlier, Vortexa data show, while overall crude imports declined just 8.6pc to 1.37mn b/d, according to Kpler.
PAL-ing around with VLCCs
Though much of Vancouver’s exports have been shipped to the US west coast, Canadian producers have found ready buyers in Asia-Pacific as well, where about 160,000 b/d of Vancouver exports went between 20 May and 20 August, compared with none a year prior, Kpler data show.Buyers and sellers have displayed a preference for using ship-to-ship transfers onto very large crude carriers (VLCCs) at the Pacific Area Lightering zone (PAL) off the coast of southern California, rather than sending Aframaxes directly to refineries in east Asia. Of the 30 Vancouver-origin Aframax cargoes that have landed in China, South Korea and India, 19 were transferred onto VLCCs at PAL, Kpler data show. Seven cargoes were sent directly to east Asia on time-chartered Aframaxes — the majority by Suncor — and just four were sent using spot tonnage, likely due to the expensive economics of trans-Pacific Aframax shipments.
The Vancouver-China Aframax rate between 1 May and 20 August averaged $5.90/bl, with a low of $4.94/bl from 19-20 August and a high of $6.41/bl from 1-10 May and again from 4-12 June, according to Argus data.
Over the same time, the cost to reverse lighter, or transfer, three 550,000 bl shipments of Cold Lake crude from Vancouver onto a VLCC at PAL averaged about $8.055mn lumpsum, or $4.92/bl, with a low of $4.35/bl from 8-13 August and a high of $5.45/bl on 22 May, according to Argus data. This includes $150,000 ship-to-ship transfer costs at PAL, 15 days of VLCC demurrage and three days of Aframax demurrage for each reverse lightering.
VLCC costs could change preferences
Though it may have been cheaper to load TMX crude on VLCCs at PAL since May, volatility in the VLCC market — which often falls to yearly lows in summer before climbing to seasonal highs in the winter — could entice traders to opt for direct Aframax shipments if VLCCs hit their expected peak in the winter.
VLCC costs for shipments from the US west coast to China are influenced by the VLCC markets in the Mideast Gulf and Brazil, where ships look for their next voyage after discharging on the US west coast.
For now, Vancouver-loading Aframax rates are under pressure from the reemergence of VLCCs in what had become an Aframax trade in Thailand, boosting Aframax supply in the Pacific and pulling the class’s rate to ship crude from Vancouver to the US west coast to its lowest level in more than three months on 19 August.
In mid-July, VLCCs resumed discharging via single point mooring (SPM) at Thailand's port of Map Ta Phut for the first time since January 2022, ship-tracking data from Vortexa show. Prior to the SPM's return to service, VLCCs could discharge cargoes only by lightering onto smaller Aframaxes, which would then unload at a different berth in the port.
This created demand for about eight Aframax lighterings each month, but with VLCCs in Thailand again able to discharge directly, that demand is effectively halted, putting downward pressure in the broader southeast Asia Aframax market.
Since July, two Aframaxes have left the southeast Asia market for Vancouver, according to ship tracking data from Kpler: the Eagle Brisbane, which previously was used in lightering operations at Map Ta Phut, and the Blue Sea, which recently hauled fuel oil from nearby Singapore to China.
Spotlight content
Related news
Opec+ eight agree 411,000 b/d hike for July: Update
Opec+ eight agree 411,000 b/d hike for July: Update
Adds details throughout London, 31 May (Argus) — Eight core Opec+ members have agreed to a third consecutive month of accelerated output hikes, the Opec secretariat said today. Saudi Arabia, Iraq, Kuwait, Russia, the UAE, Algeria, Oman and Kazakhstan will raise their collective crude production target by another 411,000 b/d in July, matching the increases agreed for May and June. This pace is three times faster than the group's original plan to unwind 2.2mn b/d of voluntary cuts at a rate of 137,000 b/d each month between April 2025 and September 2026. The eight's combined production target will rise to 31.79mn b/d in July, from 31.38mn b/d in June and 30.96mn b/d in May. These figures exclude additional pledges to cut output by members that have exceeded their targets. The group of eight produced 30.71mn b/d in April, according to Argus estimates. The decision means they will have restored around 55pc of a scheduled 2.46mn b/d increase — which includes a 300,000 b/d capacity-related adjustment for the UAE — in just four months. The announcement comes against a backdrop of global economic uncertainty, driven by US president Donald Trump's trade tariff policies, which have contributed to a $10/bl drop in Ice Brent crude futures since early April. But the eight countries cited a "steady global economic outlook and current healthy market fundamentals, as reflected in the low oil inventories" as the basis for their decision. Delegates told Argus the accelerated pace also reflects frustration with overproducing members such as Kazakhstan and Iraq — the former still producing above target, and the latter falling short of pledges to compensate. At least two members pushed to pause the unwinding process, a source said, citing budgetary pressure from subdued oil prices. Another factor supporting the faster increase may be lower expectations for non-Opec+ supply growth this year and next, particularly in the US, where falling prices have curbed drilling activity. The actual increase in Opec+ production may fall short of the headline figure, given that some members are already producing above their targets and almost all of the eight have pledged to compensate for past overproduction. The group noted that the faster pace would help facilitate this compensation. The group is scheduled to meet again on 6 July to decide on August production levels. By Bachar Halabi and Aydin Calik Send comments and request more information at [email protected] Copyright © 2025. Argus Media group . All rights reserved.
ExxonMobil upbeat over Guyana arbitration
ExxonMobil upbeat over Guyana arbitration
New York, 31 May (Argus) — ExxonMobil is confident of prevailing in an international arbitration case over a share of Guyana's vast offshore oil riches that has pitted the top US major against smaller rival Chevron. "We are confident the judges will go in our favour," senior vice-president Neil Chapman said as the private hearing wrapped up in London last week. The three-person arbitration panel at the International Chamber of Commerce is expected to give its ruling within two to three months in relation to the contractual dispute that has held up Chevron's pending $53bn acquisition of US independent Hess. Speaking at the Bernstein 41st Annual Strategic Decisions Conference in New York last week, Chapman said such contractual disputes are not uncommon in the oil industry, but they are normally resolved in private. ExxonMobil is the operator with a 45pc stake in the Stabroek block off the coast of Guyana, where an estimated 11bn bl of oil equivalent have been discovered over the past decade. Both it and Chinese state-controlled CNOOC, which has a 25pc holding, have asserted a right of first refusal over the 30pc interest owned by Hess. That stake is the key attraction in Chevron's planned takeover of Hess, which will address concerns over the company's long-term growth prospects and help narrow a gap with ExxonMobil. The case is also being closely watched by oil and gas lawyers and could have a bearing on how future contracts are drawn up. Hess and Chevron have argued that a right of first refusal does not apply in the event of a corporate takeover. The arbitration has delayed the takeover, which has already won approval from US anti-trust regulator the Federal Trade Commission as well as Hess shareholders. ExxonMobil's Chapman played down concerns about whether relations with the other parties would suffer as a result of the long-running squabble. Hess has been a "very good partner" in Guyana and "in terms of operations, in terms of investments, we're 100pc aligned", he said. Fight for your right ExxonMobil argues that little would change if Hess ended up winning the arbitration case and Chevron went on to complete its acquisition. "We believe strongly you have to protect your contractual right, the Chinese believe the same thing and that's why we went to arbitration," Chapman said. "If the judges decide that's not the case, then we get a new partner," he added. Under such a scenario, it would be business as usual. "We have partnerships with Chevron all over the world. It's been no change in terms of how we're working together at all," Chapman said. Chevron has previously warned that the Hess acquisition could be derailed if the arbitration case sides with ExxonMobil.But such is Chevron's optimism that it will close the deal that the company snapped up almost 5pc of Hess shares at a discount on the open market in the first quarter. The move reflects Chevron's conviction in "our confidence in the successful arbitration outcome", chief financial officer Eimear Bonner said in March. Chevron's chief executive Mike Wirth has similarly expressed confidence in Hess' position on a number of occasions. "This has been studied extensively, and we feel like they clearly have the right side of this argument, and we look forward to closing the deal," he said earlier in the year. Hess' core argument is that such pre-emption rights do not apply because of the structure of the merger and language in the relevant clause. "Chevron and Hess believe that ExxonMobil's and CNOOC's asserted claims are without merit," Hess said in a filing in April, adding that it plans to "vigorously defend" its position before the tribunal. By Stephen Cunningham Guyana: Stabroek block Send comments and request more information at [email protected] Copyright © 2025. Argus Media group . All rights reserved.
Opec+ eight agree another 411,000 b/d hike for July
Opec+ eight agree another 411,000 b/d hike for July
London, 31 May (Argus) — Eight core Opec+ members have agreed to a third consecutive month of accelerated output hikes, three delegate sources told Argus . The eight — Saudi Arabia, Iraq, Kuwait, Russia, the UAE, Algeria, Oman and Kazakhstan — will raise their collective crude production target by another 411,000 b/d for July, matching their decisions for May and June. This pace is three times faster than the group's original plan to unwind 2.2mn b/d of voluntary cuts at a rate of 137,000 b/d each month between April this year and September 2026. By Aydin Calik and Bachar Halabi Send comments and request more information at [email protected] Copyright © 2025. Argus Media group . All rights reserved.
US oil output rises to record in March: EIA
US oil output rises to record in March: EIA
Calgary, 30 May (Argus) — US crude production rose by nearly 250,000 b/d in March to a record high on gains from each of the largest producing states. Output nationwide averaged 13.49mn b/d in March, up from 13.24mn b/d in February, the Energy Information Administration (EIA) said Friday in its Petroleum Supply Monthly report. Production also rose from 13.17mn b/d in March 2024. Texas, home to 42pc of the country's crude production, pumped out 5.71mn b/d in March, up from 5.66mn b/d in the month prior and 5.58mn b/d a year earlier. Operators in New Mexico, which shares the prolific Permian basin with Texas, produced a record 2.26mn b/d in March, up from 2.16mn b/d in February and 2.01mn b/d in March 2024. North Dakota halted a three-month skid, producing 1.16mn b/d in March, up from 1.13mn b/d in February. But the state's production fell from 1.22mn b/d in March 2024. Offshore output in the Gulf of Mexico averaged 1.79mn b/d in March, up from 1.76mn b/d in February but down from 1.82mn b/d a year earlier. The EIA expects crude production nationwide to average 13.42mn b/d in 2025 and 13.49mn b/d in 2026, according to its latest Short-Term Energy Outlook (STEO). Those forecasts are lower by 90,000 b/d and 70,000 b/d, respectively, compared to EIA's outlook in April, as global trade tensions are expected to weigh on demand. By Brett Holmes Send comments and request more information at [email protected] Copyright © 2025. Argus Media group . All rights reserved.
