In the LOOP: March LOOP crude deliveries drop on subdued demand

Deliveries of LOOP sour crude dropped in March, one month after flows reached their highest level in half a year, a Louisiana Offshore Oil Port report showed Monday.

LOOP delivered more than 845,000 barrels of the sour crude from its storage in March. That is compared with the six-month record high of 1.135 million barrels of LOOP sour crude that was delivered in February.

US Gulf Coast refining activity hit its lowest point in about a year during March. The Energy Information Administration data showed that in the week that ended March 22, the USGC refining complex ran at 87% of capacity, the lowest level since the week that ended February 16, 2018.

Market sources said this was partly due to a fire at ExxonMobil's Baytown refinery, one of the largest in the US, as well as other planned and unplanned repair work in the region. With regional refining appetite quelled, demand for LOOP sour may have been dampened.

However, March's deliveries of LOOP sour still remained relatively strong, when compared with the six-month average of about 730,000 barrels delivered.

There has been strong demand for sour, heavier crude grades such as LOOP sour in recent months as there has been limited supply due to OPEC production cuts, in addition to dwindling supplies out of Venezuela.

Go deeper: Podcast - Will Venezuela's oil sector ever recover?

LOOP also reported that the crude delivered ex-cavern in March maintained its density with an average API of 29.8 degrees. LOOP Sour's sulfur content decreased to 2.06% in March, compared to 2.21% sulfur reported in February. LOOP's six-month sulfur quality average is 2.18%.

Separately, LOOP will auction 7,200 capacity allocation contracts in its monthly crude storage auction on Tuesday, which collectively equal 7.2 million barrels of storage for the medium crude blend. The minimum bid price LOOP will accept during the auction is 5 cents/b. Monthly storage for LOOP Sour traded around 5 cents/b for all of 2018.

Auction co-host Matrix Markets said LOOP will sell up to 3,600 storage futures contracts and 3,600 physical forward agreements. The front-month contract of May will see 300 CACs put up for sale.

LOOP and Matrix in March sold a total of 2.175 million barrels of storage capacity of the 7.4 million barrels that were offered.