Page 15 - NorthAmOil Week 26

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Surprising surge seen in LOOP oil exports

LOUISIANA EXPORTS from the Louisiana Offshore Oil Port record supply cuts in an attempt to prop up oil
(LOOP) are reaching record highs, which may prices.
be seen as surprising given that overall US crude “Of the exports loaded from LOOP this year,
exports have fallen amid low demand caused by virtually all are heading to Asia,” commodity
the coronavirus (COVID-19) pandemic. analytics firm ClipperData’s director of com-
Mars crude – a medium-sour grade of oil modity research, Matt Smith, was quoted by
produced from the Mars platform offshore Lou- Reuters as saying.
isiana, which is jointly owned by Royal Dutch According to data from Genscape, LOOP
LOOP is currently the Shell and BP – accounts for the majority of oil exports had quadrupled to 420,345 barrels per
only US port that has exported through LOOP. The surge in exports day by June 26 from 102,209 bpd in February.
the capacity to fully comes as domestic refiners on the Gulf Coast Over the same period, US crude exports from
load VLCCs. that process Mars crude have cut refinery runs other terminals declined by 21% to 2.31mn bpd,
by more than 20%, according to data from the Genscape said.
US Energy Information Administration (EIA). LOOP is currently the only US port that has
Indeed, refineries globally have cut output in the capacity to fully load very large crude carri-
response to falling demand as a result of the lock- ers (VLCCs), which can hold up to 2mn barrels
downs imposed to contain COVID-19. of oil. A number of other oil export facilities
Nonetheless, the Mars barrels that are not have been proposed for the Gulf Coast, notably
being absorbed by Gulf Coast refiners are instead around Corpus Christi, to accommodate surg-
going to Asia. This is attributed to the fact that ing volumes from the Permian Basin. However,
Asian refiners that normally process high vol- it will be some time before any of these termi-
umes of similar Middle Eastern crude grades nals are built, and some may yet be scrapped,
need to replace barrels that are currently not especially if demand remains low for longer
being supplied by OPEC, which has imposed than expected.™

Pricing agencies launch new

US crude benchmarks

US GULF COAST TWO leading oil price reporting agencies – an impact. They argued that waterborne crudes
Argus Media and S&P Global Platts – announced such as Brent were far better insulated from the
last week that they were launching new oil pandemic because they had easy access to tanker
benchmarks on June 26 to reflect the price of US storage compared with landlocked price grades.
Gulf Coast-traded crude on tankers. The move The two agencies use different methodolo-
seeks to break away from the traditional, land- gies for their price assessments. The new Argus
locked system. It comes after a period of intense American GulfCoast Select (AGS) will initially
The move to establish oil price volatility, with West Texas Intermediate be based on activity at Houston, but will later
new benchmarks seeks (WTI) plunging into negative territory for the expand to cover other locations such as Corpus
to break away from the first time in April. Christi, Nederland, Clovelly and St James.
traditional, landlocked The two agencies are competing to price “Traders will now have the option of a new
system. more than 3mn barrels per day (bpd) of crude benchmark that will represent the totality of the
shipped to global markets from the Gulf Coast. Gulf Coast market,” Argus’ head of Americas,
These barrels are currently underpinned by the Euan Craik, was quoted by Reuters as saying.
WTI futures price, reflecting crude delivered at The new Platts benchmark, also known as
Cushing, Oklahoma, around 500 miles (805 km) American GulfCoast Select, focuses on Permian
away. The crude grades traded from the Gulf are Basin crude set for export.
currently quoted as a premium or discount to “Cushing has for several years failed to
WTI, rather than as an outright price, reflecting represent the economics of crude oil in this
prices for oil at storage terminals. market. Market participants have called for a
In contrast to WTI, Brent is priced on an benchmark that correctly reflects the core of the
island in the North Sea, where tanker storage physical market in the Gulf Coast, rather than
is accessible. And when WTI fell into negative a landlocked financial value,” S&P Global Platts’
territory, energy analysts from Goldman Sachs Americas editorial director, Richard Swann, was
pointed out that this difference could have had quoted by Reuters as saying.™

Week 26 02•July•2020 www. NEWSBASE .com P15