Prices for sour crude oil have increased globally this month after top exporter Saudi Arabia increased prices and expanded production cuts of higher – sulfur oil in the first sign its efforts to prop up global prices is having an effect.
This month, the De facto leader of the Organization of the Petroleum Exporting Countries(OPEC) depended on its production scrapes to 1 million barrels per day in response to benchmark prices that fell below $72 a barrel this summer.
Mark Rossano, a partner at energy data provider Primary Vision Network said that ” the Kingdom’s curbs have had an excessive effect on the supply of medium- and heavy-sour barrels.”
Also pushing up sour crude are U.D. government purchases to restock its emergency reserves, production outages from Canadian wildfires, and worried about the potential for Atlantic hurricane season to cut production of U. S. crude oil.
Moreover, most of Saudi Arabia’s crude oils, like Arab Light, Medium, and Heavy, are sour grades, which is a type that requires more complex refining and typically trades at a discount to sweet crude, which has lower sulfur content.
But surcharges are no longer cheap. According to the traders, Norway’s medium sour Johan Sverdrup crude oil increased on Friday to a record $3.50 per barrel premium, compared with a more than $6 discount in December.
However, Mars also traded at a $3.70 premium to the Middle East crude benchmark Dubai, significantly higher than spot Middle Eastern crude.
According to brokerage CalRock, Western Canadian Select heavy crude, another widely discounted sour grade, traded at the U. A. Gulf Coast on Monday at a $2.30 per barrel discount, compared with a more than $8 per barrel discount as recently as March.
Traders and brokers said Saudi Arabia’s price increase to Asia, and the second month in a row, has pushed some Chinese refiners to seek cheaper sour crude alternatives from the spot market, which has lifted prices for other sour crudes.
Rohit Rathod, an energy data provider Vortexa analyst, said U.S. Gulf Coast refiners, mostly configured to run sour crude, will likely purchase more Latin American barrels.
” OPEC + players are pulling back supplies, and we are already in a tight market, at least for sour crudes.”
