Narrow sweet-sour spread prompts Saharan Blend import into LOOP: In the LOOP

The Louisiana Offshore Oil Port last week saw a rare tanker of light sweet crude, evidence of US Gulf Coast refiners looking to run more sweet crudes as a result of the narrower sweet-sour crude spread.

Trafigura last week imported into LOOP 700,000 barrels of 44.3 API Saharan Blend on the tanker Cape Baxley. That is the first time the crude has arrived at LOOP since at least September 2015, though Valero typically imports about 1 million barrels/month of Saharan Blend into nearby Gramercy, Louisiana.

Trafigura fixed the tanker at Worldscale 45, according to S&P Global  Platts fixture reports.

The move is notable because LOOP customers tend to focus on waterborne imports of heavy and medium sour crudes. The top five imported crudes into LOOP in 2017 so far are Basrah Light, Arab Light, Kuwait, Arab Medium and Basrah Heavy, according to customs data. Those five crudes account for 84% of total waterborne imports into LOOP in 2017. The lightest of those, Arab Light, is typically 33.3 API.

Saharan Blend is typically 45 API and 0.09% sulfur with a 23% cut of naphtha, 13% yield of kerosene/jet fuel, 21% diesel and 22% heavy gasoil, according to various crude assays. Comparatively, the regional light grade Light Louisiana Sweet is 36.6 API and 0.36% sulfur while Bakken, which can reach Louisiana refiners via the Dakota Access, ETCOP and Bayou Bridge pipelines, is 42.3 API and 0.12% sulfur. LLS has a 17% yield of naphtha, 13% kerosene, 28% diesel and 28% heavy gasoil. Bakken has a 28% cut of naphtha, 12% kerosene, 21% diesel and 20% heavy gasoil.

Narrow sweet-sour spreads have led to many US Gulf Coast refiners looking to run more sweet crudes. A Valero executive said in June the company was "maximizing" its use of light sweet crude that month and will likely do so in the near term.

The LLS-LOOP Sour spread, for example, has averaged about $3.45/b in July compared with $3.80/b in April. There is less of an incentive to run sours because of roughly equivalent coking margins. The Mars US Gulf Coast coking margin premium to the LLS US Gulf Coast coking margin has averaged about $1.15/b in July compared with $2.10/b in January and $3.45/b in August 2016.

The price of Saharan Blend had until recently been on a fairly steady decline. Saharan Blend started 2017 at a 15 cents/b discount to the Mediterranean Dated Brent strip but by mid-June had fallen to minus 95 cents/b, the lowest values since August 2014, Platts data show. More recently, however, it has regained some strength and on Friday was assessed at a 10 cents/b premium to the strip. That compares with a 2016 average of Dated Brent plus 25 cents/b, Platts data show.

The 'In the LOOP' Americas crude oil wrap runs each Monday in Crude Oil Marketwire, North American Crude and Products Scan and on the Platts Global Alert. You can read the FAQ: USGC LOOP Sour crude here and find the full special report LOOP Sour Crude: A benchmark for the future here.