US oil exports: WTI fob down despite bullish indicators

The price of WTI fob to the Gulf Coast declined this week against Ice Brent despite outages in Libya and strong demand from Asia-Pacific.

The discount of WTI loading 15-45 days forward at the US Gulf Coast narrowed by 35¢/bl against October Ice Brent over the week to a $2.43/bl discount on 20 July. Waterborne WTI held roughly steady against WTI Houston at around a 30¢/bl premium.

The Nymex benchmark rose as reports reflecting a slump in US industrial activity and faltering consumer demand reinforced suggestions the US Federal Reserve may be close to winding down its campaign of rate hikes. Lower interest rates are typically associated with stronger demand for refined products and higher crude prices.

US industrial output posted a monthly decline of 0.5pc in June, matching the prior month's decline, according to Federal Reserve data released 18 July. Manufacturing output fell by 0.3pc after a 0.2pc decline.

A stronger Nymex benchmark has made WTI less attractive on paper in Europe, forcing sellers to lower fob offers to entice buyers.

Meanwhile, the dirty Aframax rate from the US to Europe declined by 45¢/bl to $4.91/bl, improving arbitrage economics.

The arbitrage could also be helped by outages in Libya — a major exporter of light sweet crude to Europe. The country briefly lost a third of its crude output when protests hit two oil fields following a two-year streak.

Nearly 400,000 b/d of Libya's 1.2mn b/d of crude output was shut in on 13-14 July owing to protests at two key fields in the southwest. Although production was swiftly restored following a key politician's release in Tripoli on 15 July, the incident is a timely reminder that the politically fragmented country remains a key risk to global oil supply.

Khalifa Haftar, a powerful military figure, is effectively threatening to shut down up to 90pc of the country's oil output unless he gets greater access to Libya's oil revenues. His deadline is 31 August.

Buyers in Asia-Pacific continued to purchase US crudes this week, bringing the number of August loading VLCCs destined for Asia-Pacific counted by Argus to at least 25 or about 54mn bl compared to roughly 16 July-loading VLCCs.

A rare 1mn bl cargo of Alaskan North Slope (ANS) may have sold for October delivery to China, according to traders.

In March and June this year, two cargoes of around 1mn bl each departed ANS' home port of Valdez in Alaska and made the voyage to Huizhou in China's Guangdong province, where state-owned CNOOC operates a 440,000 b/d refinery. CNOOC increased crude runs at the Huizhou refinery by 120,000 b/d in May after reopening a 240,000 b/d crude unit.

Indian state-controlled refiner Hindustan Petroleum (HPCL) was heard purchasing a cargo of WTI in the tender it closed this week seeking 1-10 October deliveries to Visakhapatnam on the country's eastern coast.

Taiwan refiner CPC purchased two spot October delivering VLCCs of WTI in its recent light sweet tender, according to market participants. CPC was also heard to have nominated a third VLCC of WTI for October delivery as a part of a term contract.

Separately, China's economy grew by 6.3pc in the second quarter compared to a year earlier, while the country's GDP growth in the first half of this year came in at 5.5pc. China's January-June GDP growth shows a post-Covid lockdown recovery but falls short of market expectations.

By Jose Munoz and Calder Jett