Lower U.S. imports of heavy crudes this summer from Canada, Mexico and Venezuela will impact deliveries to the U.S. Gulf Coast and result in tighter heavy crude spreads, creating headwinds for refiners Valero Energy, Phillips 66 and PBF Energy, according to Tudor, Pickering, Holt and Co. (TPH).

“We’re likely to see fairly tight heavy crude discounts this summer and beyond,” TPH Refining Analyst Matthew Blair wrote in an April 22 research report.

“Maya and Western Canadian Select (WCS) at Houston are trading roughly $12/bbl and $10/bbl under Brent so far in April, the tightest spreads year-to-date, and Maya will narrow by another $1 in May with the new K factor,” Blair said.

K factor reflects how quickly a home goes through its heating fuel, according to HOP Energy LLC, a full-service energy company, indicating the gallons of fuel burned per degree day.

TPH said the delivery of Canadian heavies to PADD 3 totaled 387,000 bbl/d (34% heavy share) in 2023, but the new 590,000 bbl/d TMX linefill pipeline will present additional competition for those barrels for West Coast and Asian refineries.

Mexico represented the largest share of heavy deliveries with 404,000 bbl/d (34% heavy share) to PADD 3 in 2023, according to TPH, and state-owned Petroleos Mexicanos (Pemex) recently canceled export shipments as it eyes the start of its new 340,000 bbl/d Dos Bocas refinery by September 2024.

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Venezuelan heavy crude imports to the U.S. were above 500,000 bbl/d between 2013-2018 before completely halting in 2020-2022. These volumes rose to 133,000 bbl/d in 2023 “as the U.S. offered various carrots to the [Nicolas] Maduro government in exchange for promises on fairer elections,” TPH said. Off these volumes, 94% were heavy barrels for the U.S. Gulf Coast.

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Venezuela heavies represented 11% of PADD 3 heavy volumes in 2023, but just 1% of total PADD 3 crude runs. According to U.S. Department of Energy data in 2023, Valero ran 62,000 bbl/d of Venezuelan heavies, followed by Chevron Corp. (45,000 bbl/d), Phillips 66 (11,000 bbl/d), and PBF (8,000 bbl/d).