Tumbling differentials for US Gulf Coast medium sour crudes as part of an end-of-year selloff are opening arbitrage opportunities for those grades to move across the Atlantic Ocean or head east, S&P Global Platts data show.
The Platts LOOP Sour-Dubai spread, used to measure the arbitrage for US Gulf Coast sour grades to Asia, has gradually widened in recent weeks and ended last week at its widest value since mid- to late-November. On Friday, the 10-day moving average spread was $1.63/b, with LOOP Sour less than Dubai. The spread has widened six of the past nine trading days since reaching of 82 cents/b on December 5, Platts data showed.
Platts data suggests the cost to move crude from the USGC to the West Coast of India is about $2.30/b compared with $2.60/b to Singapore and $3/b to China.
Recent Platts fixture reports show a number of companies fixing or looking to fix crude tankers out of the Gulf Coast. Last week, Shell, BP, Unipec, Petrochina and Swiss Oil fixed eight tankers with a combined 1.02 million mt of capacity. By comparison, five ex-USGC tankers with a combined 620,000 mt of capacity were heard fixed in over a week one month ago, Platts data shows.
Unipec had the largest fixture, fixing a to-be-named VLCC at an as-yet unknown rate to move crude to Singapore. Platts assessed the dirty VLCC Caribbean-Singapore route at $3.9 million Friday. Shell fixed the Suezmax Sonangol Huila at $2.9 million to make a West Coast India with options route. BP and Vitol fixed the Suezmaxes Ridgebury John Zipser and Frio to go Transatlantic at Worldscale 61.75 and 65, respectively. Petrochina also is looking to Northwest Europe, having booked the Aframax Minerva Ellie at w115 out of Corpus Christi.
Platts trade-flow software cFlow projects US crude exports will average 1.144 million b/d in December compared with 1.091 million b/d in November, an increase of 5%.
Medium sour grades across the USGC have seen their values decline as 2017 comes to a close. The declines began after the US Thanksgiving holiday but the pace has picked up over the past week. The blended crude LOOP Sour, which is comprised of US Gulf of Mexico and imported Middle East barrels, ended last week at a $1.30/b premium to cash WTI, down $1/b from the beginning of the previous week.
The most-liquid US Gulf of Mexico grade, Mars, has seen its differential to cash WTI fall $1.40/b over the first half of December compared with a 65 cents/b increase during the same period of time in 2016, Platts data shows.
