US Gulf coast high-sulphur fuel-grade petroleum coke spot availability has tightened in recent weeks as sulphur content and overall coke output have dipped because of lighter crude slates.
US Gulf coke production is down by 15-25pc on account of refineries using lighter crudes, according to multiple sources. "Overall spot availability of cargoes from US refineries is low," one trader said.
At least three or four refiners in both Texas and Louisiana that would typically produce 6.5pc sulphur fuel-grade coke have been producing closer to 5pc sulphur or less because lighter crudes tend to be sweeter, specifically cutting high-sulphur availability.
US Gulf sour crude prices have risen so far in June because of low supply, a halt to Chevron's Venezuelan crude imports and concerns surrounding Canadian wildfires. July Mars was at about a $1.40/bl premium to US benchmark WTI at the Cushing hub in Oklahoma last week, about 30¢/bl higher than a week earlier and $1/bl firmer than at the start of the trade month, encouraging refiners to buy more light, sweet domestic crudes. Sour crudes tend to be heavier and contain more of the Conradson carbon that makes up petroleum coke.
"WTI is pretty cheap right now," a second trader said. "Many refineries are using that, and it's a lighter crude."
The threat of high US tariffs on Canadian and Mexican crude imports earlier in the year may have also encouraged refiners to switch away from these crudes, which make higher volumes of 6.5pc sulphur coke. Refiners may be taking more Latin American crudes, which tend to produce lower sulphur content coke. Colombian Castilla Blend and Vasconia have climbed by $3-$4/bl against WTI this year because of higher demand, and Colombia's crude exports to the US reached a five-month high in April, according to Kpler data.
US Gulf coast asphalt prices have also been higher than coker yields in recent weeks, which may be contributing to lower coke production. Asphalt production has declined because of a narrow light-heavy crude spread, partly caused by the limited sour crude availability, and refinery outages in the first quarter. Coker yields have been below asphalt values for 10 consecutive weeks, with the Argus-calculated coker yield holding a $14.50/short tonne discount to Gulf asphalt on 6 June.
Traders seeking replacement high-sulphur supply could be further tightening the fob US Gulf spot market. Traders receiving mid-sulphur under high-sulphur contracts are looking to sell that supply into the mid-sulphur market at a higher return, rather than use it to fulfil contractual obligations for high-sulphur coke.
"If I expected to get 6pc and I get 4.5pc, I'm going to go into the market and buy 6pc," another trader said.
This may explain why some recent refiner sales have gone at significantly higher levels than netback prices from traders selling contracted supply into delivered markets. Although there are not a lot of downstream buyers seeking fob-basis cargoes, traders are needing to cover short positions, while there are "not a lot of refinery tonnes out there", a fourth trader said.
"We are not able to find any spot cargo from refineries," the first trader said, which is supporting prices "even though demand is not great."
But the tighter availability from refiners is not causing prices to rise, as there is still a lot of contracted volume in traders' hands, and demand has been relatively weak. Traders still have a lot of volume to move in July and August, a fifth trader said.
Another factor is higher supply from refiners outside the US Gulf: Spanish refiner Repsol has begun producing high-sulphur coke at one of its refineries, and there is also new high-sulphur supply from Mexico.
Weak demand for high-sulphur coke from buyers in India, China and Turkey, where coal has been competitive, still pushed the fob US Gulf 6.5pc sulphur coke price down by 50¢/t last week.
The spread between mid- and high-sulphur has also been narrowing because of the tightness in high-sulphur combined with greater mid-sulphur availability. The 4.5pc sulphur US Gulf price's premium to 6.5pc sulphur has held at $4.50-$5/t over the past three assessment weeks, down from $11/t on the week of 15 April and the lowest since early February.
