Canada imported less oil in 2020, but U.S. grew its slice of import market during pandemic

The United States further cementeditself as the top supplier of oil imports to Canada last year, even as the amount ofcrude that Canada importedplunged by a fifth amidst the economic fallout of the pandemic.

New data from theCanada Energy Regulator says the country's oil imports tallied about555,000 barrels per day during 2020, downfrom 693,000 a year earlier.

Most of that oil came from the United States, which now represents about 77 per cent of Canada's oil imports. That's up from 72 per cent in 2019, according to ananalysisfrom the Calgary-based agency released Wednesday.

Saudi Arabia (13 per cent), Nigeria (four per cent) and Norway (three per cent) trail behind the U.S.

A decadeearlier, U.S. crude represented less than 10 per cent of Canada's oil imports.

"The big thing that's changed in the last 10 years is the surge in production in the U.S.," said Darren Christie, the regulator's chief economist, in an interview.

"As their production was doubling, we were a natural market for some of that increased crude. And similarly, ourrefineries that were previously importing crude from overseas had a more economic supply closer to home."

In 2020, the only non-U.S. oil imports were in Atlantic Canada, says the analysis.

Canada continues to export a lot more oil than it imports 6.5 times more with the vast majority of the 3.7 million barrels per day exported in 2020destined for the United States.

However, the regulator said Canadastill relies on oil imports to feed refineries in Ontario, Quebec and the Atlantic provinces.

Less than athird of Canadian crude oil is processed by Canadian refineries, according to the regulator, and roughly 40 per cent of the country'srefinery needs were met by imports last year.

"While Canada produces more oil than required to meet its domestic refining needs, some refineries import crude oil for a variety of reasons," the CER's analysissays.

Among the reasons listed by the regulator:a lack of pipeline access to domestic supplies, the specific feedstock requirements ofcertain refineriesand economics.

"Refineries are designed to most efficiently refine specific types of crude oil," Christie said.

"And then in terms of economics,it's no surprise that depending on where exactly the refinery is, relative to where exactly the supply source is, it might be cheaper to get a similar product from one area versus another."

The CER says the mainreason for the drop in Canada's oil imports during 2020 was related to COVID-19, withrefineries requiring less crude as demand for refined petroleum products fell.

Indeed, demand for oil droppedaround the world last year as pandemic-related health measureslimited travel, reducing the appetitefor products like gasoline and jet fuel.

The 'million-dollar' question

The regulator says that when the COVID-19 pandemic hit, refineries in all regions of Canada were affected.

"Western Canadian refineries were impacted less than refineries in Ontario, Quebecand Atlantic Canada," it says.

"These western refineries, and to a lesser extent those in Ontario, made substantial recoveries by the end of 2020. Refineries in the main importing regions of Quebec and Atlantic Canada have been slower to recover from the pandemic impacts compared to refineries in the rest of Canada."

Christie said demand has increasedin recent months, but he added it's hard to say what exactly will happen in 2021.

"We're not in the situation we were early in the pandemicalot of the demand is back," Christiesaid. "But the million-dollar question now in terms of what's going to happen with demand is really what's going to happen with the pandemic."