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US crude oil exports to Europe increasing on wider Brent/WTI spread

The recent widening of the spread between Brent and WTI crude benchmarks, combined with spring refinery maintenance in the US Gulf, has helped increased US crude exports to Europe in April, pressuring an already well-supplied sweet crude market, traders said.

Although Brent’s premium to WTI has fallen 95 cents/b since the start of the year to $5.24/b, it has increased $2.21/b since the start of March, and follows a premium of around $3.00/b throughout much of February.

As Brent’s premium has risen, WTI-based domestic sweet grades have become more competitive with Brent-based North Sea, Mediterranean and West African grades in export markets.

Additionally, decreased demand from US Gulf Coast refineries amid spring turnaround season has left more volume available for the export market.

Offers of US crude have been flooding the European market in recent weeks, with volumes expected to arrive from the third decade of April and into the first half of May, trading sources said.

Both delivered and FOB offers have been seen, with US Gulf crudes offered into Northwest Europe and Mediterranean at Dated Brent plus $1.20-$1.40/b the week before last, sources said, before dropping to Dated Brent plus 40-60 cents/b last week.

“There is pretty much everything offered — WTI, Eagle Ford, Mars, also Canadian [heavy crudes]…there is a decent volume available,” a crude trader said, adding he saw pressure starting to build on light sweet, Mediterranean crudes including Azerbaijan’s Azeri Light, Kazakhstan’s CPC Blend and Algeria’s Saharan Blend.

With most grades on offer falling on the sweet side of the barrel, a shiver has gone through the sell-side of the Mediterranean sweet market.

“Volumes — the rumor is around 500,000 b/d, so it would be the lighter grades which will be affected,” a second crude trader said.

CPC Blend saw its premium to Dated Brent dive at the end of last week, from Dated Brent minus 55 cents/b on Wednesday to Dated Brent minus $1.13/b on Thursday after five offers were shown in the Platts Market on Close assessment process. It then held steady Friday.

“It is an impact straight from US barrels. This is why sellers are showing lower values,” the first trader said.

The impact of US barrels was also being felt on West African barrels heading to the European market.

“There is a serious discount for WTI Midland against WTI on an FOB basis. It is only a little more competitive [compared to West Africa] in terms of absolute price. But it is cheaper,” a West African trader said.

Source: Platts

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