US oil exports: WTI mixed while TMX rises

US light sweet waterborne spot crude prices were mixed over the week as Asian buying interest firms.

WTI loading 15-45 days forward at the US Gulf coast narrowed its discount to December Ice Brent by 50¢/bl to 93¢/bl. The free-on-board (fob) value weakened by 4¢/bl against the secondary coastal crude benchmark WTI Houston to a 26¢/bl midpoint premium as October-loading differentials were mostly unchanged due to a major industry event happening in Singapore this week.

Demand for WTI climbed a bit earlier in the week as Asia-Pacific refiners stepped up their purchases of October-loading WTI prior to the start of S&P's Asia Pacific Petroleum Conference (APPEC) conference this week in Singapore. It was unclear whether the pace of Asian buying would continue after this week.

Asian buyers typically seek WTI supplies around two weeks earlier than European customers. Prior to the spike in Asian buying of WTI, Chinese demand had been relatively weak, although delegates at the Singapore conference said this demand weakness was overstated.

Chinese oil demand growth is slowing but has not yet peaked, while growth in the use of naphtha and jet fuel is offsetting declines in motor fuel consumption, delegates heard at the Argus Asia-Pacific Oil Markets Forum on 10 September. The growth in the use of naphtha and jet fuel is offsetting declines in motor fuel consumption.

The slowdown in oil demand growth is attributed to signs of weakness in the Chinese economy and the country's push for electric vehicles. Despite the slowdown, some experts believe that the weakness in Chinese oil demand is being exaggerated, and they view China as a maturing market with lower growth like other OECD countries.

Elsewhere, tanker freight rates are expected to increase in the coming months due to a recovery in demand for dirty tankers, according to delegates at the Appec conference in Singapore. The rates for clean tanker freight fell in the third quarter due to competition from dirty tankers, but there has been a recent increase in demand for dirty tankers, hinting at a general recovery in the fourth-quarter rates.

Americas Pacific coast

Values for Canadian crude exported via the 590,000 b/d Trans Mountain Expansion (TMX) pipeline strengthened amid volatility in the underlying futures market.

Free-on-board (fob) High-tan crude exported from Vancouver strengthened 10¢/bl to a $10.53/bl discount to January Ice Brent, while Cold Lake fob Vancouver rose 20¢/bl to a $9.55/bl discount against the benchmark.

Ice Brent crude futures prices fell below $70/bl during the week, the first time since late 2021. This decline came after low Chinese crude imports in July and the delay by OPEC+ alliance members to increase output. Despite disruptions to Libyan crude output, the prices continued to fall. OPEC's research arm remains bullish on oil demand, while some trading firm executives suggested that prices may need to fall further to stimulate demand. Analysts and traders are factoring in the softness in China, the impending Federal Reserve easing cycle in the US, and mixed messages from OPEC.

Elsewhere, sections of the 622,000 b/d Keystone crude pipeline remain at reduced pressure since a spill nearly two years ago, but its operator is making strides to have those restrictions potentially removed.

TC Energy's Keystone pipeline is a major thoroughfare for Canadian heavy crude destined for the US midcontinent and Gulf coast, but a rupture in December 2022 took the cross-border pipeline off line for more than three weeks.

Service was mostly restored in the months following the incident, but more crude could likely be moved down the line if pressure restrictions are lifted.

Canada's west coast now exports more Canadian crude than the US Gulf coast after the startup of the TMX pipeline. Lifted restrictions on the Keystone pipeline could potentially disrupt crude flows through TMX.

By Andrea Agee and Rachel McGuire