A rise in competing crude supplies at the US Gulf coast pushed Colombian heavy crude exporters to ship more Vasconia and Castilla Blend crude to the US west coast and Asia. But west coast deliveries are becoming less profitable and the arbitrage to Asia more difficult to work.
Vasconia prices weakened versus its main US west coast competitor Alaskan Northern Slope (ANS), while a widening Brent-Dubai spread supported the Castilla Blend arbitrage to Asia.
Vasconia's average discount to ANS for delivery to Los Angeles through the Petroterminal de Panama (PTP) pipeline was $2.60-$4.06/bl in the first half of this year. Vasconia's delivered discount to ANS has since narrowed to $1.30-$2.30/bl in the second half of the year so far.
Colombian crude has served as incremental supply for California refineries, but Vasconia exports through the PTP to the US west coast rose from January through June.
Colombian exports can move from Covenas through the Panama Canal, or through the PTP and then load on vessels to the US west coast and other destinations in Asia and South America. The majority of Colombian crude volumes are put in Panama storage for re-export.
A total of 26.3mn bl of Vasconia was exported from Covenas to Panama between January and October, with 71pc of that volume re-exported to the US west coast. Over the same period, 11.8mn bl of Castilla Blend were exported from Covenas to Panama, with 10pc re-exported to the US west coast.
In the second half of the year, volumes of Vasconia re-exported to the US west coast showed signs of decline, in line with a narrowing Vasconia discount to ANS.
Between July and October, an average 1.5mn bl of Vasconia was exported to the US west coast from an average 2.1mn bl between January and June.
Colombian crude was regularly re-exported to Asia and South America from Panama storage. Of the 26.3mn bl of Vasconia placed in storage through October, 29pc was re-exported to Asia and South America, compared with 90pc of the 11.8mn bl of Castilla Blend.
Average volumes of Castilla Blend re-exported to the US west coast in the first half of the year were the same as between July and October. But the widening front-month Brent-Dubai swaps may have encouraged more re-exports of Castilla Blend to Asia, specifically, in the first half of the year compared to the second.
The Brent-Dubai front-month swaps spread ranged between $3.60/bl and $4.40/bl from January through June, a higher spread than the $3.10/bl to $3.90/bl from July through December to date.
A widening spread in the past has meant crude differentials on the Pacific coast for Latin American grades have fallen with competing Asian grades based on Dubai.
Though west coast deliveries are becoming less profitable and the arbitrage to Asia more difficult to work, Potential Opec production cuts next year could push refiners in Asia to look for medium and heavy sour crude alternatives from Latin America like Vasconia and Castilla Blend.
