US deepwater sour crude values have fallen to their lowest average in over a year as a result of surging supply.
January Mars averaged a roughly 80¢/bl discount to Domestic Sweet, the widest level since November 2024 trade. The medium sour also averaged a $4.18/bl discount relative to March Ice Brent, compared to a 7¢/bl premium to that basis in the same period of 2024.
Medium sour Southern Green Canyon's (SGC) discount to the Cushing, Oklahoma, benchmark averaged almost $1.90/bl for the January trade month. The last time an SGC final trade month discount was so deep was for March 2023 deliveries.
Three new projects have helped boost US Gulf of Mexico output since mid-2025 and will continue to add to supply.
Beacon Offshore Energy's 120,000 b/d Shenandoah floating production system started delivering oil into Genesis' SYNC pipeline in July. The line connects to the Cameron Highway Oil Pipeline System (Chops), which feeds the SGC crude stream. Beacon said in October that Shenandoah had reached its 100,000 b/d target.
Elsewhere, BP recently started up the Argos Southwest Extension project, adding 20,000 b/d of oil equivalent (boe/d) to the existing platform. Argos output also goes into Chops to feed the SGC stream. And LLOG Exploration's Salamanca project, which achieved first oil in the third quarter, is expected to ramp up to its design capacity of 50,000 b/d by mid-2026 and flow into the medium sour Poseidon stream.
Additionally, BP's Atlantis Drill Center 1 oil field expansion project started up two months ahead of schedule, the company reported on 11 December, and is expected to add peak production of around 15,000 boe/d. Atlantis' gross oil production capacity is 200,000 b/d and feeds into the Chops stream.
The new production has led to an increase in SGC spot activity. Argus tallied 300,000 b/d of SGC spot trade for December, the largest monthly volume since the assessment was launched in 2006. To date in the January trade month, around 259,000 b/d of spot deals have been reported.
The additional spot supply has also boosted SGC's share of Argus Sour Crude Index (ASCI) spot activity for the July-December trade months to 26pc, the highest since the launch of the index in 2009.
ASCI is a volume-weighted average of US Gulf sour crude deals — comprising Mars, Poseidon and SGC — and is used as the basis for official selling prices for crude from Saudi Arabia, Iraq and Kuwait.
US Gulf deepwater production is projected to average 1.95mn b/d in 2026, up from 1.9mn b/d in 2025, according to the US Energy Information Administration's most recent Short-Term Energy outlook.
Canadian pressure
Sour crude values in the US are likely to face further pressure as Canadian crude production is expected to increase.
Alberta oil sands output hit record highs this year and is projected to continue to grow in 2026. July-October production averaged 4.22mn b/d, up by 4pc on the year, data from the Alberta Energy Regulator (AER) show. Canadian crude and condensate production is forecast to rise by 1.7pc in 2026 to a record 4.85mn b/d, according to Argus Consulting, a division of Argus Media.
Further adding to supply, Chevron resumed imports of heavy sour Venezuelan crude in August. Around 155,000 b/d of Venezuelan crude was exported to the US in October, up slightly from September and the highest since March, Kpler data show.
But sour values could see support going forward as Venezuelan oil flows are disrupted by building US pressure on Caracas. Little crude tanker traffic has moved out of Venezuela's main ports since the 10 December seizure of a Venezuelan tanker, with the exception of cargoes chartered by Chevron and a few other foreign oil majors working with state-owned oil firm PdV, industry and government sources say.
Iraq has also been seeking new outlets for Kirkuk crude, with some making its way to the US Gulf coast, as its inconsistent quality dampened Mediterranean demand, and US refiners have been showing interest in heavier grades.
Export demand has also slowed with the increase in cheaper alternatives globally in addition to higher freight rates. US Gulf coast sour crude values received some support recently from purchases of 900,000 bl of sour crude for December-January delivery to the US Strategic Petroleum Reserve (SPR). But the support may be short-lived despite President Donald Trump's goal to refill the SPR. Currently there is only enough funding for the purchase of around 3mn bl of crude, or about 1pc of the roughly 290mn bl that would be needed to refill the SPR to its authorized storage capacity of 714mn bl.
