Lingering Ida outages may encourage sour crude imports

Ongoing outages at offshore facilities handling US Gulf medium sour crude in the wake of Hurricane Ida are supporting the arbitrage to import competing international grades.

About 40pc, or roughly 720,000 b/d, of offshore oil production remained off line as of 12:30pm ET today after Hurricane Ida's landfall 29 August, according to the Bureau of Safety and Environmental Enforcement (BSEE). The Mars, Ursa and Olympus platforms are being restaffed but remain off line as Shell continues to assess damage at a key shallow-water pumping station, the West Delta-143 (WD-143) platform, which delivers into the 400,000 b/d Mars pipeline.

The WD-143 outage has cut some Mars deliveries to the coast, with just 15,000 b/d of prompt October Mars reported trading in the spot market over the last seven trade sessions. That compares to 42,000 b/d of reported trade volume for similar-quality Poseidon crude over the same time frame and 40,000 b/d for Texas-delivered Southern Green Canyon (SGC).

Mars, a key sour crude grade at the US Gulf coast, is trading around parity to the US light sweet crude benchmark at Cushing, Oklahoma, or 65¢/bl higher than the Argus Sour Crude Index (ASCI) as of market close yesterday.

This may open the door for more competing sour crude supplies to be imported from the Mideast Gulf while Mars remains in positive territory relative to ASCI.

Iraqi state-owned marketer Somo issued its official selling prices (OSPs) for October-loading cargoes today, lowering the Basrah Medium differential to ASCI by $1/bl from September to a $1.35/bl discount. That level would reflect an approximately 15¢/bl discount to ASCI after estimated delivery costs to the US Gulf coast, or 80¢/bl under October Mars and roughly 30¢/bl under the November Mars price.

Arab Medium is meanwhile priced at a 65¢/bl premium to ASCI for October-loading, or an estimated $1.50/bl premium after delivery, indicating Saudi crude may still be too expensive to compete against spot Mars.

The Valero-chartered Suezmax Faithful Warrior is in transit to the Houston, Texas, area after departing the Basrah Oil Terminal around 28 August, according to shipping data from Vortexa. Chevron is meanwhile chartering a cargo of Kuwaiti crude on the Suezmax Fraternity, which loaded around 31 August and is expected to arrive in Texas City on 23 October.

Regular buyers of Mideast Gulf crude at the US Gulf coast include Chevron, Marathon Petroleum, Motiva, Valero and ExxonMobil, according to company-level import data by the US Energy Information Administration (EIA).

Most Saudi and Iraqi crude is sold via term contracts, but companies have the option to request extra volume, and surplus Basrah is occasionally sold via spot tenders.

By Amanda Hilow