Oil refineries located on the coast of the American Gulf are faced with a dilemma, with high demand for sour crude, as the refineries of the Suez Canal in Egypt are next in line.
High-sulfur oil prices are experiencing a world record in recent times in light of the decline in oil production, which was affected by voluntary decisions recently taken by some members of the OPEC+ alliance aimed at achieving global market stability.
It is likely that higher demand for sour crude will cut supplies of the commodity to refineries dotted along the U.S. Gulf Coast in the coming weeks after a voluntary cut that took effect from the current month of May, according to Reuters.
A voluntary cut of 1.16 million barrels per day in production by some OPEC+ countries will reduce sour oil inventories, while U.S. refineries will accelerate purchases of raw materials in the summer season, according to information received by the specialized energy platform.
Meanwhile, the shutdown by Anglo-Dutch oil company Shell of its 375,000 bpd Zydeco oil pipeline on the Gulf Coast in April due to a leak is also contributing to supply cuts, traders and analysts said.
And March crude oil prices recently jumped to $1.60 for U.S. crude oil futures contracts in trading on Tuesday, May 9 (2023), the highest level since September (2020), according to traders.
Commenting on the recent movement in demand for this type of oil, Gina Delaney, head of crude oil in North America at consulting firm Energy Aspects, said: “We are seeing demand for sour crude around the world growing strongly.”
She added: “The capacity of the new refineries coming online east of the Suez Canal in Egypt will also help boost demand for sour crude over the remainder of this year (2023).”
For his part, Matt Smith, chief oil analyst for the Americas at Kepler Corporation, said: “Many Gulf Coast refineries are now fully equipped to process sour crude because they take the least amount of this oil. crude oil from the Middle East, while boosting their imports from Brazil.”
Smith explained: “The price of sour oil from the Middle East is very high, which prevents refineries located on the US Gulf Coast from increasing their imports, and then encourages them to redirect their destination to Latin America – especially Brazil – to import shipments of sour oil transported by the sea.”
According to IIR Energy Senior Managing Director Hilary Stephenson, U.S. refiners Valero Energy Group, Marathon Petroleum Corp. and British oil company BP Whiting in the Midwest are the largest buyers of sour crude.
In April (2023), US energy giant Chevron’s exports totaled 140,876 bbl/d of Venezuelan sour and heavy oil, according to data released by both financial analysis platform Refinitiv Eikon and the Venezuelan National Oil Company. “PDVSA”. .
These exports were carried out under a US license allowing the import of sour crude for the first time in 4 years, according to information tracked by the Specialized Energy Platform.
“We think the majority of Chevron’s production from this region (Venezuela) will go to the Gulf Coast,” said Gary Simmons, commercial director of Valero Energy.
In this regard, refinery executives indicated that the expected increase in Canadian sour crude production could increase the rate of pumping this commodity to the market.
But expanding Canada’s Trans Mountain pipeline next year (2024) will divert more Canadian oil to the Pacific coast rather than the US Gulf Coast, says Matt Smith, senior oil analyst at Kepler for the Americas.
According to a survey by the S&P Global Platts platform, OPEC+ oil production in April (2023) decreased by 380 thousand barrels per day compared to March (2023).
OPEC+ oil production from countries outside the Organization of the Petroleum Exporting Countries (OPEC), led by Russia, fell by 10,000 bpd to a record 13.39 million bpd.
OPEC+ oil production is likely to continue to decline from May (2023) under the influence of voluntary production cuts by a number of other countries.
Source: Energy Platform
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