US exports: WTI fob steadies, Asian buying continues

WTI fob prices were steady against Ice Brent prices this week as strong Asia Pacific demand was balanced by higher freight costs to Europe.

August loading WTI rose to a $2.08/bl discount to October Ice Brent on 13 July, up by 2¢/bl from a week earlier. WTI was assessed at 33¢/bl premium to WTI Houston compared to 44¢/bl a week prior.

WTI continued to price competitively against light sour Murban crude, compelling usual buyers in Asia-Pacific to increase their appetite and some non-traditional buyers to enter the market for US light sweet crude.

Asian Pacific buyers have purchased more US light sweet crude for August loading compared to July. Argus has counted 20 August-loading very large crude carriers (VLCCs) of US crude so far, not including Taiwan refiner CPC which is expected to issue a buy tender next week. CPC typically purchases 2-3 VLCCs of US light sweet crude.

The dirty VLCC rate from the US Gulf coast to China reached $3.68/bl on 13 July compared to $3.97/bl a week earlier, supporting arbitrage economics to Asia-Pacific.

Saudi Arabia's state-controlled Saudi Aramco allotted several key Asia-Pacific refiners and at least three buyers in Europe their full nominated crude volumes for August following the extension of the 1mn b/d Saudi production cut into August.

In light of the Saudi cuts, as well as Russia's planned 500,000 bl reduction in exports, buyers are likely reducing their nominated volumes in the face of higher prices, which could be causing them to turn to other suppliers like the US.

Refinery processing of crude at the US Gulf coast rose by 350,000 b/d the week ending 7 July, bringing the capacity utilization in the region up to 93pc according to information from the US Energy Information Administration (EIA). Total US throughputs rose by 630,000 b/d to 16.7mn b/d, pointing toward strengthening demand for crude domestically.

Gains in the price of WTI fob may have been tempered this week by higher freight cost to Europe, though. The dirty Aframax rate from the US to Europe rose by $1.19/bl to $5.36/bl this session, further eroding the transatlantic arbitrage for WTI. Delivered pricing of WTI to Europe has also fallen this week.

The light sweet crude market may tighten in the face of disruptions earlier this week in Libya. Output from Libya's biggest oil field was reduced, marking the second field in the country in as many days to be disrupted by protesters after a year of relative production stability. Only a few wells have been shut down and will return shortly, according to an Argus source. The disruption at El Sharara comes after the nearby 70,000 b/d El Feel field was shut down by protesters on 13 July.

Looking further out, production from the Forties oil field in the UK North Sea — the largest contributing field to the Dated Brent basket — might cease production around 2030, earlier than the previously planned 2037, as inflation rates increase decommissioning costs.

Separately, the Texas port of Corpus Christi has completed a channel-deepening project that will allow the top US export terminals to load more crude onto VLCCs.

The Ingleside facilities hold a competitive advantage because they can load a 2mn bl-capacity VLCC to 1.2mn bl, with the remainder of the cargoes loaded by Aframax shuttle vessels once the VLCCs are in deeper waters. With a deeper channel, Enbridge Ingleside Energy Center (EIEC) has said it will be able to load VLCCs to 1.6mn bl and will also be able to fully load Suezmax vessels.

By Ginikanwa Okoronkwo