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Mars rallies amid tighter US Gulf Coast sour crude market

Highlights

With crude imports via Louisiana down 5% year on year, according to US customs data, and a tight Colombian Vasconia market, differentials for Gulf Coast sour benchmark Mars have steadily rallied since late November, according to S&P Global Platts data.

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Platts assessed prompt Mars at WTI minus $1.55/b on Monday, its strongest level since February 2016.

The Gulf Coast has seen less Vasconia in part due to increased exports of the Colombian grade to Asia, as well as tighter volumes in general, due to the Cano Limon pipeline being offline.

On Monday, outright Vasconia was assessed at $47.70/b and the cost of freight to ship crude on an Aframax tanker from Covenas, Colombia to the USGC was assessed at 90 cents/b.



When compared with the assessed second-month Mars outright value of $47.41/b, the economics for selling Vasconia competitively into the USGC do not line up, even if producers were able to supply higher levels of the grade.

It is possible that buyers looking for Vasconia are having to replace those volumes with Mars.

While Platts does not currently track Gulf Coast refining margins for Vasconia, coking margins for Mars have pushed above $11/b in February and into March.

Platts margin data reflects the difference between a crude's netback and its spot price. Netbacks are based on crude yields, which are calculated by applying Platts product price assessments to yield formulas designed by Turner, Mason & Co.

But the general tightness seen in the Gulf Coast could be exacerbated by a lack of comparable grades in the market, which may be tied to OPEC-related supply cuts.

Weekly US Energy Information Administration data shows imports of Saudi crude fell almost 500,000 b/d to 1.08 million b/d in the week that ended March 10. Imports from Iraq and Kuwait were down as well, to 403,000 b/d and 79,000 b/d, respectively.

--Mary Hogan, mary.hogan@spglobal.com

--James Bambino, james.bambino@spglobal.com

--Edited by Keiron Greenhalgh, keiron.greenhalgh@spglobal.com