In the LOOP: LOOP Sour crude oil discount to Mars narrows while API gravity declines

US Gulf Coast crude oil blend LOOP Sour has gradually gotten heavier over the year while its discount to one of its component blends, Mars, has narrowed, according to data from the Louisiana Offshore Oil Port and S&P Global Platts.

LOOP Sour delivered ex-cavern in August had an average API gravity of 29.6 and sulfur content of 2.49%. The average API has declined in five of the past seven months and 0.9 degrees over that time. LOOP Sour in August was at its heaviest since reaching 29.5 degrees in October 2017, LOOP data published Monday showed.

LOOP Sour is comprised of the US Gulf of Mexico grades Mars and Poseidon and a crude blend called Segregation 17, into which the Middle Eastern grades Arab Medium, Basrah Light and Kuwait Export Crude can be delivered. The grade has been most similar to Mars in terms of API gravity over the past 12 months -- averaging 0.33 degrees off Mars' typical 29.44 -- and Arab Medium from a sulfur standpoint -- averaging 0.02 percentage points off Arab Medium's typical 2.53%.

As it has become heavier, LOOP Sour has also become more valuable relative to Mars. LOOP Sour averaged a 30 cents/b discount to Mars in July and August compared to discounts of 37 cents/b in June and 61 cents/b in May, Platts data show.

Ex-cavern deliveries of LOOP Sour were 1.19 million barrels in August, or about 38,000 b/d compared to the 12-month average of 48,000 b/d. Mars production is about 451,000 b/d compared to 240,000 b/d for Poseidon. Imports at LOOP of Basrah Light have averaged 166,000 b/d in 2018, while imports of Kuwait averaged 35,000 b/d, according to S&P Global Platts Analytics and US Customs data. No Arab Medium has been imported into LOOP since July 2017.

It is notable that LOOP Sour has gotten heavier when more Poseidon could be blended into the pool. Poseidon has been the laggard of the US Gulf Coast sour crude market in 2018. Its discount to Mars has widened for six consecutive months and Poseidon averaged 84 cents/b under Mars in August. With LOOP Sour valued at least 50 cents/b higher than Poseidon, there is a clear incentive to deliver it into the LOOP Sour pool. That should skew the blend lighter -- Poseidon is about 30.39 API -- and yet that does not appear to have been the case so far.

LOOP Sour API, sulfur and ex-cavern deliveries have averaged the following in 2018:

Source: LOOP