US oil exports: WTI fob up on Opec+ export cuts

The price of WTI fob US Gulf coast rose after Saudi Arabia and Russia announced they would extend their export cuts through the end of the year.

WTI fob's discount to December Ice Brent narrowed by 23¢/bl to 48¢/bl over the week, while its premium to the WTI Houston pipeline index rose by 8¢/bl to 51¢/bl.

Saudi Arabia announced this week that it will extend its export cuts of 1mn b/d through the end of the year. This is the third time Saudi Arabia has extended the cut, which when combined with a 500,000 b/d cut that began in May, keeps Riyadh's production at around 9mn b/d until the end of 2023.

As Riyadh extended its cut, Saudi state-controlled Aramco marginally raised its official October crude formula prices to Asia-Pacific and the US while modestly cutting most of its European prices. The price increase came as a surprise to a few buyers in Asia-Pacific, who expected Saudi Arabia to cut prices to keep its crude competitive given that arbitrage arrivals in Asia are expected to rise because of a narrower Brent-Dubai spread. 

Russia announced in tandem with Saudi Arabia that it would extend its export cuts of 300,000 b/d until year-end. The voluntary cuts, which were introduced in August at 500,000 b/d and tempered in September to 300,000 b/d, will be based on a May-June baseline, Russian deputy prime minister Alexander Novak said. These cuts are in addition to Moscow's pledge to reduce production by 500,000 b/d from March until the end of 2024. 

The continuation of cuts by OPEC+ heavyweights means that buyers in Europe and Asia-Pacific will have to rely more on US crudes like WTI for supply as they have since the initial cuts. The increase in the price of medium to heavy sour crudes has caused refiners in Asia-Pacific and Europe to turn light sweet imports from the US. Crude exports in the US topped 130mn bl for the second time ever in August, according to preliminary data from analytics firm Vortexa.

Refiners in Europe are also contending with lower exports of Libyan crude, as shipments of Es Sider crude fell 6pc to 936,000 b/d in August, their lowest since July last year. The decrease of Libyan crude to the core markets of the Mediterranean is largely led by a 24pc drop in exports to Italy, though the decline was partially offset by Turkey returning as an outlet for Libyan crude in August after a seven-month hiatus.

Separately, departures from the Louisiana Offshore Oil Port (LOOP), which typically exports medium sour Mars, reached a record high of just over 5mn bl, or roughly 168,000 b/d, in August, according to preliminary data from analytics firm Vortexa.

Medium sour Johan Sverdrup has become a mainstay for refiners in Europe since the EU ban on Russian crude imports in March 2022, but 2023 has brought with it the stoppage of exports from Iraqi Kirkuk and Opec+ cuts for refiners to contend with, which appears to have caused refiners to look elsewhere for supply, including the US.

It is unclear if more Mars will continue to deliver to Europe in September but it seems less likely. Refiners in China have re-entered the market and purchased about 6mn bl of Mars for September loading, according to market participants, and exports from LOOP rarely breach 10mn bl/month.

By Anna Muthalaly and Calder Jett