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Overtime, though, there are fears Gulf Coast refiners may eventually revisit their procurement strategy, especially if heavy oil stops trading at a discount to light oil.

“If that light-heavy oil differentials tighten, you would stop seeing the incentive to buy the heavy barrel,” Wojciechowski says.

Martin King, vice-president of institutional research at Calgary-based FirstEnergy Capital Corp., believes Canadian producers would see greater competition if the U.S. export ban is scrapped.

“There’s still market-share capture opportunity for Canadian crude in the U.S., and certainly an opportunity for Canada to capture more international market through re-exports of Canadian crude going through the Gulf Coast,” King said. “That may get choked off a bit.”

Canadian producers such as Cenovus Energy Inc. and Suncor Energy Inc., apart from BP and Royal Dutch Shell Plc, have begun shipping mostly light Canadian crude to the international markets via the U.S. Gulf Coast, but that channel could close for Canada if international importers seek larger quantities from the U.S., King said.

The arrival of U.S. crude into the international market may also eventually challenge OPEC producers who have been actively driving down the prices by raising output to squeeze out high-cost producers.

OPEC Secretary-General Abdalla El-Badri said Tuesday any removal of the U.S. export curbs won’t affect oil prices.

But scrapping the U.S. export ban would help North American crudes to fetch market prices and integrate the U.S. Oil and gas market with the rest of the world.

“Instead of having an obstruction in place of having all this supply that’s not getting to the rest of the world, we will see proper flow of crude,” said King. “It’s not more supply but it takes that supply and moves it elsewhere.”

However, Wojciechowski warns that after a “short-term exuberance” in prices, markets will consider the sobering view that U.S. oil exports will be in the form of a “trickle” rather than a flood over time.

With files from The Associated Press, Bloomberg and Reuters



yhussain@nationalpost.com

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