<article><p class="lead">The free-on-board (fob) WTI price at the US Gulf coast has reached its narrowest discount to the international benchmark Ice Brent since before the Covid-19 pandemic amid higher demand for light sweet crude in the domestic market. </p><p>WTI fob Houston was assessed at a 48¢/bl discount to September Ice Brent on 11 June, reflecting a 72¢/bl increase week on week and its strongest value against the benchmark since December 2019. </p><p>The waterborne crude has been trending higher since mid-May as it follows strength in the US domestic pipeline market. WTI fob Houston has averaged a $1.18/bl discount to Ice Brent since the 26 May start to the July US trade month, up by 91¢/bl compared to an average $2.09/bl discount in the same period one month ago. </p><p>The fob WTI spread to the Argus WTI Houston pipeline index has averaged a 4¢/bl discount in the same period of July trade, up just 2¢/bl compared to an average 6¢/bl one month ago. </p><p>But underlying US crude benchmarks have been narrowing versus the European marker as domestic refinery demand improves ahead of driving season, which typically results in stronger demand for light sweet crudes that produce transportation fuels like gasoline and jet fuel. </p><p>The July Nymex discount to September Ice Brent narrowed to just $1.20/bl at the end of last week, or 67¢/bl narrower than the prior week. </p><p>Crude processing rates at US Gulf coast refineries rose by 225,000 b/d to 8.6mn b/d in the week ended 4 June, according to the latest available weekly statistics from the US Energy Information Administration (EIA). </p><p>The regional utilization rate of operable capacity increased by 3.2 percentage points at the same time to 92.9pc, reflecting the highest usage of US Gulf coast refining capacity since January 2020.</p><p>US light sweet waterborne prices have been inflated relative to international values as domestic producers keep cargo prices in line with a more competitive domestic market, but the export arbitrage may be difficult-to-work at the current level. </p><p>WTI delivered to the Netherlands port of Rotterdam was last assessed at parity to Dated Brent, which would reflect a roughly $1.45/bl discount to September Ice Brent on an equivalent fob basis at the US Gulf coast if traveling by way of Aframax tanker. This indicates US sellers would need to trade at a much larger discount to the WTI Houston pipeline index in order to compete economically in the European market. </p><p class="bylines">By Amanda Hilow</p></article>
