REFINERY MARGIN TRACKER: USWC refiners replace Russian crude with Middle Eastern, Latin American grades

US West Coast refiners are increasing imports of Latin American and Iraqi crude to replace Russian barrels, ceasing to buy ESPO, Sokol, and CPC Blend despite any official ban by the United States on imports of Russian crude, an analysis from S&P Global Commodity Insights Platts showed on March 7.

Despite the heavy price discounts for Russian crudes, with Urals trading at a $28.50/b discount to Dated Brent last week, USWC refining margins remain strong for Latin American and Middle Eastern grades.

Market sources noted on March 7 that a cargo of Sokol offered last week at a $1/b discount to Dated Brent is now offered at a $14/b discount.

US refiners, as well as some European refiners, are seen shunning Russian crude following that country's increased military activity in the Ukraine.

Par Pacific Petroleum publicly stated its 93,500 b/d Kapolei, Hawaii, refinery would stop buying Russian crude, which accounted for over 25% of the plant's crude slate in 2021.

Thus US imports of Russian crude averaged of 52,000 b/d in February are falling to virtually zero, according to US Customs data. In 2021, Russian supplied 209,000 b/d of all US crude imports, Energy Information Administration data showed.

Also in 2021, USWC refiner dependence on Russian crude increased to average 90,000 b/d, up from 2019 pre-coronavirus pandemic levels of 49,000 b/d.

On Feb. 26, 2022, Marathon took a 740,135 barrel cargo of ESPO into its Anacortes, Washington, refinery, according to commodity tracker Kpler, which also shows a cargo of Sokol fixed on Feb. 18 expected to arrive at the plant on March 21.

But so far, March exports of ESPO appear to primarily directed at Chinese refineries, according to data from commodity tracker Kpler with any US-directed barrels still to arrive fixed ahead of the uptick in Russian military action in the Ukraine.

Latin America, Middle Eastern import volumes keep rising

USWC refiners looking to the Middle East and South America to fill the void left by Russian crudes are still enjoying strong refining margins, particularly as diesel cracks continue their upward trajectory. The Brent-ULSD crack reached a high of $32.75/b on March 7.

About 694,000 b/d of waterborne crude imports were fixed for week ended March 11 for USWC plants, with the majority of barrels coming from the Middle East and Latin America, Kpler data showed.

Imports of Iraqi crude into the USWC averaged 106,000 b/d in February, Kpler data showed. But barrels fixed the last week of the month jumped to average 293,000 b/d.

Stripping out RINs costs, the Renewable Fuel Standard credits, USWC coking margins for Basrah medium crude with averaged $24.24/b for the week ended March 4, up from the $20.65/b the week earlier, Platts Analytics margin data showed.

USWC coking margins without RINs for Ecuador's Napo averaged $24.49/b for the week ended March 4, up from the $21.49/b the week earlier.

Imports of Ecuadorean crude into the USWC averaged 114,000 b/d in February, according to Kpler data, above the 98,000 b/d average imported in 2021.