In The LOOP: Gulf Coast sour crudes reach low for the year after spiking to four-year high

US Gulf Coast sour crude benchmark Mars has had a dramatic summer -- with its differential first spiking to a four-year high in June and then dropping nearly $9/b to its lowest level of the year.

Mars, as well as other US Gulf Coast sweets and sour grades, have followed the same trajectory in recent weeks. Mars reached its highest level since 2014 on June 7, when it was assessed at a $5.80/b premium to the underlying WTI crude contract. But as quickly as it shot up, Mars has fallen sharply. August barrels were heard trading Monday morning at a $3.70/b discount to WTI, which was $1.15/b lower than where S&P Global Plats assessed it on Friday.

While August Mars has sunk, September and October barrels are seen recovering. The August/September box for Mars was heard around -$1.80/b and October barrels have traded at slight premium to WTI.

"It's nice to buy on prompt pricing and sell September," one trader said. "[It's] easy money."

"Smart refiners will pick some up here," another trader said about the August differential for Mars.

Some crude traders said narrowing spreads between WTI and Brent and WTI and Dubai are putting downward pressure on US crudes. Others said the recent lows may be a market correction to the spike seen in June, when spreads were much wider.

The front-line Brent-WTI swaps spread has averaged about $6.30/b so far in July. That's compared to an average of about $8.65/b in June. As the spread between Brent and WTI and Dubai and WTI crudes narrows, export demand for US crudes typically diminishes.

However, there continues to be demand for US crudes, including Mars and Thunder Horse, as there have been recent purchases of the grades by Asian buyers looking for alternatives to Middle Eastern crudes.

Taiwan's Formosa Petrochemical Corp., bought 1 million barrels of Mars for delivery at the end of September through mid-October. The cargo was priced at a premium of between 50 cents/b and $1/b to Dubai, CFR, according to Platts data.

Elsewhere in the Gulf, benchmark Light Louisiana Sweet has dropped by about $10/b in a month.

The grade's differentials hit a three-year high of WTI cash plus $9.95 on June 19, on a day when the front-month WTI-Brent swaps spread was at $9.83/b.

LLS was assessed Friday at a 75 cents/b premium to the underlying WTI cash basis. The grade sunk lower Monday morning, dipping to a 65 cents/b discount to WTI before strengthening slightly to be flat with WTI.