CHOPS outage prompts Louisiana ASCI dominance

The continued rerouting of US Gulf medium sour crude to Louisiana instead of Texas because of the outage of an offshore pipeline has led the ASCI price to shift further toward Louisiana grades.

Genesis' Cameron Highway Oil Pipeline System (CHOPS) has been offline since late August when a platform along the line suffered hurricane damage. Crude flowing into CHOPS is delivered to the Texas Gulf coast as the Southern Green Canyon (SGC) stream. SGC along with Louisiana-delivered Mars and Poseidon comprise the ASCI benchmark that is used in formula prices for Saudi Arabian, Iraqi and Kuwaiti crude.

With CHOPS offline, crude has been shipped instead into Genesis' Poseidon Oil Pipeline System. From there it either flows to Houma, Louisiana, where it is sold as Poseidon or it moves into the Bonito stream through the Auger pipeline.

As a result, overall US Gulf production typically flowing to SGC has not had to be shut-in for all these months but Louisiana spot trade activity has become more dominant as more crude has flowed east.

With more Poseidon available, its traded volume in the spot market has increased. And although the diverted production may not be flowing directly into the Mars stream, spot activity for the medium sour crude is supported by an overall increase in similar crude availability in the area.

Volumes impact ASCI assessment

This impacts the assessment process for the ASCI price differential when there is less than 6,000 b/d of Mars, SGC and Poseidon reported in a given day. When the volume is over that minimum, the price is a weighted average of reported deals. But when the volume does not meet the minimum, the individual price assessments for the grades are averaged using fallback ratios. These ratios change every trade quarter and reflect the prior six trade months of reported spot activity.

During the July through December trade months, Mars trade comprised 66pc of the volume, Poseidon 27pc and SGC 7pc of the spot trade included in the ASCI assessment. These are the current ratios to be applied through the end of the March trade month. But during the April through September trade months, Mars had 69pc of the trade, Poseidon 20pc and SGC 11pc.

The preponderance of Louisiana volumes comprising ASCI coincided with weaker ASCI prices as Louisiana spot prices were pressured by increased sour crude availability. After the September trade month, ASCI began dropping against SGC prices, which were supported by the CHOPS outage.

ASCI averaged a 31¢/bl premium to SGC during the October trade month, down by 50¢/bl from the September average. ASCI even flipped to a 10¢/bl discount to SGC when averaged over the November trade month, and ASCI maintained a 2¢/bl discount to SGC when averaged over the December trade month.

ASCI is averaging a 43¢/bl premium to SGC during the prompt January trade month, as of 15 December. Louisiana spot prices have been supported as recent export demand has materialized for medium sour grades like Mars.

By Amanda Smith and Alex Endress