Canadian Crude Drought Hits U.S. Refineries Amid Global Fuel Shortage

U.S. refineries have been operating at full capacity for months to make up for lost fuel supply from the Middle East, but a new challenge is emerging. Canadian crude oil production is set to decline by 300,000 barrels per day in September due to maintenance activities in the oil sands, according to Rystad Energy.

This reduction will be felt because demand for fuels remains strong despite some demand destruction caused by higher prices. Normally, Canada sends 4 million barrels of heavy crude to U.S. refiners daily, but next month there will be less.

The problem is that there's no replacement for Canadian crude, even with oil shipments from Venezuela ramping up, because they're not increasing fast enough. Venezuela exported 1.16 million barrels of crude oil per day last month, a slight decline from June's 1.2 million barrels per day.

Global fuel supply remains constrained, especially in diesel, which caused refining margins to hit all-time highs earlier this month. The diesel crack spread reached $100 per barrel for the first time in history in mid-August.