*

Canadian light crude displaces Latin American imports to

US West

Coast

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Softer synthetic crude prices likely encouraged surge in

imports, analyst says

*

Higher export capacity helps Canada gain market share,

another

analyst says

By Nia Williams, Shariq Khan

Oct 29 (Reuters) - Canadian waterborne exports of light

crude to the U.S. West Coast have surged since the Trans

Mountain pipeline expansion (TMX) began operating in May, data

shows, surprising some market participants who thought it would

mainly be used to send heavy crude to Asia and California.

The increase in Canadian light crude flows into the U.S. is

displacing imports from Latin American countries. It also

underpins the role the U.S. plays as the most important customer

for Canadian oil exports, even as TMX - which can carry a wide

range of crude grades - boosts heavy crude shipments to Asia.

Waterborne imports of light synthetic and sweet crude into the

U.S. West Coast rose to nearly 100,000 barrels per day (bpd) in

September from just 7,000 bpd in June, the first full month of

operations on the Trans Mountain pipeline expansion, data from

trade analysis group Kpler showed.

Softer prices for synthetic crude, the bulk of the Canadian

light grades that U.S. refiners buy, likely encouraged the surge

in imports, said Rory Johnston, founder of the Commodity Context

newsletter. Synthetic traded at a half-cent-a-barrel premium to

West Texas Intermediate crude futures for most of the

summer and through September, down from over $4 in April,

Johnston noted.

The barrels delivered by tankers are in addition to the

roughly 240,000 bpd being imported into Washington state via the

Trans Mountain Puget Sound Pipeline, an offshoot of the main

pipeline that can ship up to 890,000 bpd of crude from Alberta

to Canada's Pacific Coast.

A section of the Puget Sound Pipeline will be shut for about

seven days in mid-November for planned maintenance.

That could lead to even higher waterborne imports of

Canadian light barrels into the U.S. West Coast in the weeks

ahead, as those shipped through Puget Sound are typically light

grades, said Johnston.

GAINING MARKET SHARE

Other crude grades that U.S. West Coast refiners have

historically imported include medium-sweet barrels from

Argentina and Brazil. However, higher Canadian export capacity

is helping Canada displace those barrels and gain market share

on the U.S. West Coast, Kpler analyst Matt Smith said.

"Since the TMX expansion started, Canadian barrels have been

the leading waterborne supplier to Washington refineries in

July, August and September - and so far in October too," Smith

said.

U.S. West Coast refiners also see Canadian light crude as a

good alternative to medium-sour Alaska North Slope crude, a

Calgary-based trader said.

"They have always wanted more Canadian light but they

couldn't really access it," the trader said, adding that demand

to move light crude barrels on TMX was more than market

participants had anticipated before the startup.

"It's not all heavy in the expanded line. That was the

expectation and in the first month or so it was the case, but

it's slowly pivoted and now there's a bit more light."

A total of 14 shipments of crude oil have been delivered

from Vancouver to Washington state since Trans Mountain started

operating in May, Reuters ship tracking data shows. September

was the busiest month with four shipments.

The shipments were delivered to Ferndale, Anacortes and

Puget Sound, where Phillips 66, Marathon Petroleum ( MPC )

and HF Sinclair have refineries.

Phillips 66 and Marathon declined to comment on their crude

buying operations. HF Sinclair did not respond.