Differentials for US Gulf Coast light sweet crudes increased Monday, with multiple sources saying it was due to expectations that exports would increase following the closure of one of the UK's largest oil pipelines.
The 450,000 b/d Forties Pipeline transports North Sea crude to the Kinneil terminal in Scotland and is expected to be closed for several weeks following the discovery of a small leak.
The pipeline closure could cause production at several offshore fields to halt due to limited takeaway capacity, which would boost demand for US crude exports even more.
In recent months, increasing volumes of USGC light sweet crude have been exported to the UK and to Europe on the back of Brent's growing premium to WTI.
WTI has remained weak relative to Brent on growing crude production and as increasing volumes of Bakken and Canadian crude have funneled down to Cushing, Oklahoma. The steady flow of crude has led Cushing stocks to build steadily throughout the third quarter and most of the fourth quarter.
Since the start of October, Brent's premium over WTI has increased $1.15/b to $6.70/b. On a day-on-day basis, news of the Forties pipeline closure caused Brent's premium to grow by 63 cents/b alone on Monday.
Brent-based crudes have become pricier lately due to production issues, OPEC cuts causing general tightness in the market and supply disruptions for both West African and North Sea grades.
One cargo of USGC light sweet crude was recently fixed to sail to the UK. Nine additional USGC cargoes of crude have entered into the UK so far in December, according to Platts' cFlow trade flow software.
Permian light sweet crude WTI Midland rose 20 cents/b to end Monday at WTI cash plus 35 cents/b. WTI MEH crude, representing WTI Midland crude at the Magellan East Houston terminal, jumped 55 cents/b day on day to WTI cash plus $4.90/b. MEH is at its highest level since November 20, when it was assessed at WTI cash plus $5.05/b.
Light Louisiana Sweet crude also strengthened, increasing 30 cents/b to WTI cash plus $6.15/b on trade data heard. The LLS assessment was the highest since November 21, when it was assessed at $6.35/b.
WTI Midland crude has an average API gravity of 40.4 degrees and typical sulfur content of 0.32%. LLS has an average API gravity of 36.6 degrees and a typical sulfur content of 0.36%.
The two grades are similar in quality to Brent, Forties, Oseberg and Ekofisk crudes produced in the North Sea. Forties crude has an average API gravity of 38.26 degrees and typical sulfur content of 0.73%. Brent has an average API gravity of 38.05 and sulfur content of 0.39%. Ekofisk comes in with an average API of 39.08 degrees and 0.20% sulfur content while Oseberg has an API gravity of 39 degrees and sulfur content of 0.22%.
