The spread between the light crude benchmark and the heavy crude benchmark on the US Gulf has narrowed since trading for December injection commenced, signaling a higher demand for heavier crudes.
The spread between the Light Louisiana Sweet differential and the Mars differential has narrowed from plus $6.15/barrel on October 25 to plus $3.60/b Friday.
LLS has an API gravity of 34-41 and a sulfur content of 0.4%. Mars has an API of 30 and a sulfur content of 1.83%.
During the same period, the Heavy Louisiana Sweet differential rose back to a premium to the LLS differential and the spread between the two grades is widening, indicating a demand for HLS. The spread between the LLS differential and the HLS differential began the trading month at plus $1.25/b. It was flat, based on Platts data, on November 4 and widened to minus $2/b on Friday.
While HLS is slightly heavier than LLS, it is sweeter. HLS has an API gravity of 32-33 and a sulfur content of 0.3%.
While market sources agree the spreads indicate a demand for the heavier grades is increasing, not all had an explanation for the trend. A number of traders suggested Friday that the increased demand for US Gulf heavies could be related to the influx of Bakken Blend and Eagle Ford crudes coming into Louisiana by rail.
"Not sure if with specifically Mars, but medium/heavy sour are for sure the pair for Bakken," one trader said.
Another trader said that the blending of Bakken with heavy US Gulf grades "happens a lot."
The light, sweet grades can be blended with heavier grades to create a crude with LLS-like qualities, traders said.
Bakken Blend crude have an API gravity of 38-40 and a sulfur content of 0.2%. The API gravity for Eagle Ford crudes range from 40-60 and sulfur content is said by market sources to be sweet.
The prices of such crudes are so much less than LLS, the shale crudes have become a viable option for blending with heavier crudes, sources said. For example, the Bakken Blend ex-Clearbrook differential was assessed Friday at the NYMEX front calendar month average minus $2/b, with an outright price of $96.747/b. The LLS differential was assessed at WTI plus $16.40/b, with an outright price of $115.30/b.
Mars was assessed at WTI plus $111.70/b Friday and HLS was assessed at WTI plus $117.30/b.
