Executive Summary: Rigs: The total rig count remained flat for the January 19 week at 531. Infrastructure: President Trump on Monday (February 3) postponed tariffs planned on imports from Canada and Mexico by one month. Storage: East Daley expects a 5.1 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending January 31.
Rigs:
The total rig count remained flat for the January 19 week at 531. Liquids-driven basins increased by 1 rig W-o-W.
Infrastructure:
President Trump on Monday (February 3) postponed tariffs planned on imports from Canada and Mexico by one month. The decision delays a policy that would affect some crude flows to the US market and create headaches for refiners and producers alike.
The delay for Mexico and Canada caps a whirlwind of diplomacy around the tariff issue. The president on Saturday (February 1) slapped tariffs on goods from China, Canada and Mexico, including a 25% tariff on imports from Mexico and Canada and a 10% tariff on imports from China. However, Trump then postponed the Mexico and Canada tariffs mid-afternoon Monday (February 3), but kept the 10% tariff in place on China’s imports. On Tuesday morning, China announced a retaliatory 10% tariff on US crude oil imports.
The market for now has dodged a potentially disruptive measure. Crude oil markets in the US and Canada in particular are closely integrated, making it difficult for many buyers to switch to alternative supplies. US refiners import ~4.4 MMb/d of crude from Canada, accounting for 27% of US refinery demand of ~16.2 MMb/d. Canadian barrels feed refineries from the Pacific Northwest to the Northeast. The US East Coast imports Canadian offshore production from Newfoundland, and recently California starting importing greater quantities of Canadian crude from the expanded Trans Mountain Pipeline. The Midwest (PADD 2) receives the most Canadian barrels at average imports of 3.5 MMb/d or ~75% of all Canadian production.
Both nations have benefited from this integration. US refiners are eager buyers of discounted heavy Canadian barrels, and the US creates a willing market for the hard-to-refine heavy oil. Many refiners have upgraded equipment and added coker units to refine the heavy sour oil, particularly in the Midwest and Rocky Mountains (PADDs 2 and 4). These refiners lean heavily on Canadian feedstock and have limited means to replace the volume or quality.
If the 10% tariff were to go into effect, East Daley believes 90% of the Canadian crude oil flows into the US would not change. We see some risk for deliveries to California, the Newfoundland crude exported to the East Coast, and a portion of the flows into PADD 2 that travel to Gulf Coast refiners. Refiners in California may return to reliance on Alaskan ANS barrels, while buyers on the Gulf Coast and East Coast could substitute Canadian barrels with other heavy crude grades, including Venezuelan and Middle East qualities.
Storage:
East Daley expects a 5.1 MMbbl injection into commercial and Strategic Petroleum Reserve (SPR) inventories for the week ending January 31. We expect total US stocks, including the SPR, will close at 815 MMbbl.
The US natural gas pipeline sample, a proxy for change in oil production, increased 2.84% W-o-W across all liquids-focused basins. Samples decreased 5.63% in the Gulf of Mexico. Samples increased 5.26% in the Williston Basin, 3.56% in the Permian, and 2.36% in the Eagle Ford. The Rockies and the Gulf of Mexico have a high correlation between gas volumes and crude oil volumes, whereas the Permian and Eagle Ford basins correlation is less than 45%.
We expect US crude production to be 13.475 MMb/d. According to US bill of lading data, US crude imports decreased by 250 Mb/d W-o-W to 6.2 MMb/d. More than 60% of the supply originated from Canadian pipelines and vessels into the US, with the remainder largely coming from vessels carrying crude from Mexico and Argentina.
As of January 24, there was ~880 Mb/d of refining capacity offline, including downtime for planned and unplanned maintenance. EDA expects gross crude inputs into refineries to increase by ~250 Mb/d W-o-W, coming in at 15.25 MMb/d.
There was no change in vessel traffic monitored by EDA along the Gulf Coast W-o-W. There were 25 vessels loaded for the week ending January 31 and 25 the prior week. EDA expects US exports to be 3.6 MMb/d.
The SPR awarded contracts for 1.5 MMbbl to be delivered To Choctaw in January and 2.475 to be delivered to Bryan Mount Jan – March 2025. The SPR has 394.8 MMbbl in storage as of January 24, 2025.
Regulatory and Tariffs:
Presented by ARBO
Tariffs:
ETP Crude LLC The tariff is being canceled as services set forth in the joint tariff are no longer available in interstate commerce. All contracts pertaining to these joint services have expired. FERC No 20.6.0 IS25-195 (filed January 16, 2025) Effective January 24, 2025.
The above information is provided by ARBO’s Oil Pipeline Tariff Monitor. For more information on regulatory proceedings or tariff rates, please contact please contact Corey Brill via email at corey@goarbo.com or phone at 202-505-5296. https://www.goarbo.com/