The Daily Chase: TMX opens up unexpected new customer for Canadian oil

Here are five things you need to know this morning.

A new market for Canadian oil – in Hollywood? The Trans Mountain Pipeline Expansion is set to open any day now, and while the business case for the massive project has always been the potential to move landlocked Canadian crude to terminals in B.C. for export to global markets such as Asia, an interesting new customer base is opening up in the short term. Three oil tankers carrying almost 2 million barrels of Canadian crude have sailed from Vancouver to Los Angeles this month. That’s the biggest surge in four years, and at least two of the shipments were heavy crude bound for Marathon Petroleum Corp.’s Los Angeles refinery, the largest on the West Coast. While a lot of the expanded capacity is expected to be bound for fuel-hungry markets in Asia, refineries like Marathon’s on the West Coast may become a preferred customer due to proximity to Vancouver and the fact that the tankers coming in and out of the city are Aframax-sized, comparatively smaller vessels which are less likely to want to embark on long and expensive voyages to Asia if there is a closer customer. Canadian crude may displace oil from Iraq, Saudi Arabia or Latin America on the West Coast, Erik Broekhuizen, tanker researcher for Poten & Partners, was quoted by Bloomberg as saying. “The short shipping distance from Vancouver gives the TMX crude competitive transportation costs,” he said. The Canadian invasion of Hollywood is well documented in the entertainment world, so it’s interesting to think it might start happening in the energy sector, too.

Can Q1 strength continue? Today marks the end of the first quarter, one that has seen North American stock markets hit record high after record high. One might imagine that such a strong start to the year augurs well for the rest of the year, but if history is any guide, that is not always the case. BNN Bloomberg’s Jon Erlichman crunched the numbers on a recent instalment of The List and tabulated that of the 15 best first quarters on the S&P500 since World War II, the average Q1 return was 12.5 per cent. In those years, the second quarter return averaged just 3.7 per cent, and in four of those years, the second quarter was actually negative. As with most things market related, the longer the time frame, the better things tend to look, and in 14 out of those 15 years, the market ended up in positive territory by the end of the year, even when it declined earlier. The lone exception to that trend was the infamous year of 1987 when a strong start was met with a miserable finish known as Black Monday in October.

SBF to be sentenced today: Sam Bankman-Fried, the wunderkind behind defunct cryptocurrency exchange FTX, is due to be sentenced in a New York courtroom today for his role in the collapse of the company. His rise and fall has been one of the most fascinating stories in the business world in recent years, as the saga of FTX has had many twists and turns along the way. Convicted of fraud mostly on the testimony of other executives at the company, prosecutors are seeking as much as 50 years in prison for Bankman-Fried. His lawyers say a sentence of about one tenth of that would be more appropriate. We’ll find out this morning which argument won out with the judge.