US waterborne crude trade shifts toward Brent basis

US waterborne crude trading activity has shifted toward European pricing structures as rising domestic production expands exports, linking the US more closely to international markets.

Year-to-date, more than 75pc of fob trade activity for West Texas Intermediate (WTI) crude at the US Gulf coast has been reported relative to the international crude benchmark Ice Brent, with the remainder of activity heard relative to the Argus WTI Houston volume-weighted average. In the final two months of 2018, slightly more than 50pc of WTI fob trade data reported was conducted relative to Ice Brent, about 25pc against WTI Houston and less than 13pc discussed relative to CMA Nymex WTI.

In September, the first month Argus assessed WTI fob Houston, about 40pc of fob activity, was heard relative to CMA Nymex and 60pc was based on WTI Houston in the US Gulf coast pipeline market.

Argus will next week begin to publish US light, sweet waterborne assessments as differentials to the European Ice Brent crude futures contract — in addition to existing differentials published relative to CMA Nymex and WTI Houston — to reflect the shifting trade patterns.

US crude exports rose by about 10pc to a record 2.6mn b/d in November, with almost 675,000 b/d of that volume destined for Europe to compete with more regional grades such as Brent and North Sea Forties, according to the latest available trade data from the US Census Bureau.

The shifting waterborne pricing patterns are also visible at the US west coast, where the delivered price of medium sour Alaskan North Slope (ANS) crude has moved almost entirely to a Brent basis.

Argus will also begin to publish an ANS differential to CMA Ice Brent, which the value of ANS tracks in order to remain competitive with foreign crude alternatives from key exporting regions like Russia and Latin America.

All ANS deals reported to Argus for delivery to the US west coast in 2019 have been reported relative to Brent, rather than the grade's more traditional CMA Nymex WTI benchmark that was favored when US and global crude markets were more bifurcated.

The last ANS trade reported against a US benchmark was on 24 October, for December delivery to the US west coast. Just two of the 10 deals reported that month were reported relative to CMA Nymex WTI, with the remainder conducted versus Brent.

About 43pc of the ANS traded for delivery throughout 2018 was completed relative to Brent, compared with just 24pc the year prior.