Iraqi crude oil imports to USGC up, others fall: In the LOOP

Imports of Iraqi crude into the US Gulf Coast increased so far in 2018 while there have been fewer cargoes from Venezuela, Saudi Arabia, Mexico and Kuwait, according to the most recent data released by US Customs Bureau data.

From January to mid-June, US Gulf Coast refiners have imported more than 90 million barrels of Iraq's light and heavy Basrah crudes, a 14% rise from 79 million recorded in the same period of time in 2017. However, USGC refiners bought only 60 million barrels of oil produced by Saudi Arabia in the same period, which is half of the 124 million barrels imported in the same period in 2017.

Kuwait also saw reduced demand for its crude from US refineries located in the US Gulf Coast, with only 8 million barrels of crude imported from January to mid-June compared with 18 million barrels in 2017. Because of a declining crude production in Mexico, imports of Maya crude into the US Gulf Coast fell to 90 million barrels, a drop of 3.3% from the 93 million barrels recorded during the same time period in 2017.

Despite decreased Venezuelan production, Venezuela still ranks among the top five countries from which USGC refiners are buying crude. Venezuelan grades amounted to 75 million barrels year to date, almost half of the 111 million seen in the year-ago period. More Iraqi barrels have been imported into the US Gulf Coast this year as fewer cargoes of Saudi Arabian oil have been sent following production cuts.

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There also has been a reduction in available Maya crude and Venezuela crude as production in Venezuela has stagnated. Despite the average price of Maya crude deliveries to the USGC being at $59 year to date, US refiners bought more barrels from Iraq at an average of $64, according to Platts data. Maya crude prices have been weighed down recently by the sharp widening of WTS (West Texas Sour).

The WTS differential, which makes up 40% of the Maya pricing formula, has fallen in 2018 as Permian Basin production has outpaced takeaway capacity, causing bottlenecking. The WTS 30-day rolling average is at a $9.65/b discount to WTI cash.

The differential reached its widest point of the year on May 5, when it was assessed at WTI cash minus $13.75/b. The shifts in US crude imports and availability in the market could change once again as OPEC and its allies consider increasing output during their meeting later this week.

All eyes are on OPEC this week as any output increases would put more medium, heavy sour crudes in the market. However, if the group and its allies decide to maintain the current cuts, the supply of such crudes will tighten even further. Because of the tightened market, Gulf Coast sour crude benchmark Mars has been on a fairly steady rise since February.

The Mars differential to WTI cash hit its highest point since January 2014 in early June, when it was assessed at WTI cash plus $5.80/b. US Gulf Coast sour crudes strengthened Monday for the first time in a week and saw Mars 35 cents/b stronger day on day at a $3.45/b premium to WTI cash.