Argentina's light sweet Medanito crude rose to a three-month high this week on US west coast demand, as refiners prepare for the start of the summer driving season and freight rates from Argentina cool off.
Medanito on 6 March tightened its discount to June Ice Brent to $2.50/bl, narrowing by $1.20/bl, following the sale of two April-loading cargoes.
Both cargoes are headed to refiners at the US west coast, where the approaching summer driving season is set to boost demand for gasoline and diesel, consequently increasing demand for light sweet crudes like Medanito.
In addition, refiners like Marathon and Valero expect product inventories to remain constrained ahead of the driving season owing to turnarounds, supporting refining margins and crude demand.
But some turnaround activity may be concluding in California. Marathon Petroleum, a routine buyer of Medanito, is undergoing a turnaround at its 363,000 b/d Los Angeles refinery and was restarting a unit at the Carson side of the refinery this week. PBF's 156,000 b/d Martinez refinery turnaround that began in January was expected to end in mid-March.
US west coast refiners are turning to the light sweet crude as unseasonably high tanker rates from Argentina have receded.
The rate to transport Medanito on a Panamax vessel from its home port of Puerto Rosales, Argentina, to the US west coast peaked at $12.22/bl in early-February after the larger Aframax segment hit a winter peak on strong European demand for US crude, helping lift the ceiling for Panamax rates. The Panamax rate from Argentina to the US west coast has since cooled off by about $2.60/bl to $9.60/bl.
The journey from Argentina to the US west coast is estimated between 25-30 days, suggesting that the two April-loading cargoes of Medanito will arrive in May.
Other May delivery crudes to the US west coast have recently made gains, with Alaskan North Slope (ANS) crude trades increasing to $1.05/bl premium to Ice Brent CMA, up from between $0.55-0.60¢/bl premium for April deliveries.
But Medanito gains could be short-lived as US west coast demand for Latin American crudes may be dragged down once the 590,000 b/d Trans Mountain Expansion (TMX) is placed into service in the coming months, further connecting oil-rich Alberta to the Pacific coast. Asia-Pacific has long been a target for shippers on the new line, but volumes are anticipated to be placed in California or Washington first, with the former being one of the core markets for Medanito.
