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Analysis: More West African crude oil barrels make their way to US Atlantic Coast

Petrochemical Alert

Analysis: More West African crude oil barrels make their way to US Atlantic Coast

Houston — As the value of Bakken crude has risen in recent months, US Atlantic Coast refiners are relying more and more on imports of West African crudes, a Platts analysis showed.

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Cargoes of both light and heavy WAF crude grades -- mainly from Nigeria and Angola -- have risen by 2.264 million barrels month on month in May alone and by 9.658 million barrels from levels a year ago, according to Platts vessel tracking software CFlow.

Ten shipments of West African crude are expected to arrive along the USAC by the end of May, with about 10.668 million barrels on board. Of those 10 shipments, eight are destined for Big Stone Beach Anchorage, a blending and port facility in Milford, New Jersey.

US Atlantic Coast refiners in the past have taken in large quantities of Bakken crude, running mainly on light sweet grades.

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However, as Bakken has risen in value and transportation costs have been between $7/b and $10/b to rail the crude to the East Coast, West African imports have become more economic. This in turn has encouraged a steadily increasing stream of WAF imports to the region.

On the rise since fourth-quarter 2015, Bakken Blend crude at terminals in the Williston Basin reached its highest outright value since November on Wednesday at $42.35/b, Platts market data showed.

Its differential versus the front-month calendar month average of the NYMEX light sweet crude futures contract (WTI CMA) at minus $4.70/b is also at its highest level since early March. When transport costs of about $8/b are added to that, the value rises to about $50.35/b.

By contrast, Nigerian light sweet grades Bonny Light and Qua Iboe are much cheaper with outright assessments of $47.01 and $47.21, respectively.

When combined with freight costs to the US of about $1.55/b, these grades still are still lower at $48.56/b and $48.76/b, respectively, than the total delivered cost of Bakken crude.

The region also is seeing an increased amount of heavier Angolan crudes arriving, including Girassol, Pazflor and Dalia. With assessed values of $45.81, $42.61 and $42.61, respectively, each of these Angolan crudes also is more economic than Bakken when freight rates of about $1.55/b are added in.

Earlier this week, after a leak was detected on the Nembe Creek Trunk pipeline, Nigeria declared force majeure on Bonny Light shipments, which may impact the total amount of WAF imports making their way to the USAC in coming weeks.

BAKKEN RISES ON CANADIAN WILDFIRES

Wildfires in Alberta have caused Bakken crude oil to rise in value as production cuts due to the blaze raised demand for the Williston Basin shale crude, according to sources.

An estimated 1 million b/d cut in Alberta crude oil production raised differentials for regional Canadian crude benchmarks, specially light crude regional proxy Sweet Syncrude Premium, which rose $2.40/b since the fire begun, peaking at WTI CMA plus $2.65/b on Monday, Platts market data showed.

This helped buoy up the differentials for Bakken ex-Williston and ex-Clearbrook, Minnesota, which are typically shipped north towards Enbridge's 600,000 b/d Line 9, which transports crude oil from Sarnia, Ontario, to Montreal-area refineries.

Bakken ex-Clearbrook has recently traded at parity to the WTI CMA, its highest level since early March, Platts market data showed.

--Mary Hogan, mary.hogan@spglobal.com
--Luciano Battistini, luciano.battistini@spglobal.com
--Edited by Richard Rubin, richard.rubin@spglobal.com