- Records for US exports to Europe, Singapore
- Wider Brent/WTI spread, higher margins drive flows
- Suezmax rates cratered in September, providing further
support
US crude exports rose 35,000 b/d to a record 692,000 b/d in
September after Brent's premium to WTI widened, an analysis of
Census Bureau data released Friday showed.
Brent's premium over WTI widened from 34 cents/b in May to average
$1.88/b in August and $1.66/b in September. After the spread
tightened in May, US crude exports shrank to 383,000 b/d by June as
arbitrage opportunities tightened. By August, US crude exports had
bounced back to 657,000 b/d.
US crude exports have risen significantly since Congress lifted
export restrictions in December 2015.
Previously, some analysts attributed some of the early exports to
refiners testing various US grades in their systems, but that likely
is not the case anymore, according to Dominic Haywood, oil analyst
at Energy Aspects.
"Early on, it may have been test cargoes, but I think that's done
and dusted now," he said. "If you look at where the WTI/Brent spread
traded in August, it's clear that the trend is based on good
economics for barrels delivered in September, October and November."
Haywood also cited a tightening in the Atlantic Basin crude market
in the third quarter amid sustained Nigerian outages.
The US exported crude to 13 countries in September, led by Canada at
243,000 b/d, while a record 99,000 b/d of US crude was shipped to
Singapore. Out of the total, 17,000 b/d was Canadian heavy crude
re-exported to Spain, where Repsol owns coking units at its
Cartagena, Bilbao and La Coruna refineries.
US crude exports to Europe in September averaged 209,000 b/d, with
US cargoes arriving in Italy, the Netherlands, Spain, Switzerland
and the UK.
Not only has the Brent premium to WTI risen, but European refining
margins for US and Canadian crudes have climbed, showing those
grades to be more profitable in recent months. The coking margin in
Italy for WCS, for instance, averaged $8.92/b in August and $11.09/b
in September, up from $6.72/b in July, according to Platts data.
Light Houston Sweet cracking margins in Italy averaged $2.62/b and
$4.19/b, respectively, compared with $1.15/b in July.
A similar trend played in Northwest Europe, where LHS cracking
margins averaged $3.26/b and $4.42/b in August and September,
compared with $1.97/b in July.
On a delivered-cost basis, delivered-LHS cargoes averaged a premium
of just 9 cents/b to Bonny Light cargoes in Italy in September,
compared to a premium of $1.02/b in July and 20 cents/b in August.
FALLING FREIGHT RATES HELP EXPORT OPPORTUNITIES
Cheap freight also probably encouraged more traders to consider
exporting US crude, with the Caribbean-UK Continent Suezmax route,
basis 130,000 mt, averaging $5.26/mt in August, compared with
$7.94/b for the first seven months of the year.
Freight on the US Gulf Coast-Singapore route, basis 130,000 mt,
averaged just $13.28/mt in August, compared with $24.73 for the
first seven months of the year.
The record US crude shipments to Singapore could be explained by
strong regional demand from petrochemical producers, in particular
for light sweet crudes and condensates similar to Eagle Ford, to run
in condensate splitters.
The CFR Japan ethylene/naphtha spread rose in August and September,
averaging $749.65/mt and $779/mt, respectively, compared to
$637.35/mt in July and $732.88/mt in August.
STABLE EXPORTS AHEAD?
Looking ahead, Brent's premium over WTI narrowed to average $1.13/b
in October, though Census data for October exports is not likely to
show a dramatic drop off given that the spread remained healthy
through September. Margins for US export grades have held up in
October and November so far, although the return of several Nigerian
grades from force majeure and falling premiums for light sweets in
Europe may have made US crude exports less attractive.
Still, Haywood pointed out that Occidental Petroleum's recently
inaugurated facilities at Corpus Christi, Texas, represent a
significant addition of US export capacity, with Vicki Hollub, the
company's CEO, revealing this week that the terminal could load over
300,000 b/d of crude and condensate.
Occidental has dispatched the first three cargoes of crude from
Corpus Christi, and the terminal is expected to be fully operational
early in 2017, executives said Tuesday.
--Jack Laursen,
jack.laursen@spglobal.com
--Edited by Derek Sands,
derek.sands@spglobal.com
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