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As many as six Very Large Crude Carriers are loading and due to load crude oil for export at the Louisiana Offshore Oil Port, Reuters reports, citing unnamed sources in the know. The cargoes will be all medium sour grades, which have become increasingly popular among refiners.
The reason heavier graders are becoming increasingly popular is a shortage of heavy crude on global markets caused by falling production in sanction-bound Venezuela and Iran. Cuts in heavy crude production among OPEC members under the December 2018 production cut agreement also contributed to tighter supply.
One heavy crude grade in the U.S.—Mars Sour, which is produced in the Gulf of Mexico—traded at a premium of as much as US$4.40 to the benchmark contract at the start of this week, Reuters noted.
“We’ve seen very good global demand for medium and heavy sour crude oil,” a Mercuria oil trader told Reuters. In the United States specifically, imports of heavy crude from Iraq, Nigeria, Angola, and Brazil increased last month.
Asian refiners are responsible for the bulk of demand growth in this segment. Most Asian refineries are built to process a mixture of light and heavy crude grades to produce fuels and other derivatives.
The supply situation is serious enough that Chevron earlier this week asked Washington to extend its sanction waiver for Venezuela, which is one of the largest producers of superheavy oil. The country’s total oil production has fallen sharply—averaging 768,000 bpd in April—and it will fall by another 300,000-400,000 bpd if Washington refuses to extend Chevron’s and others’ sanction waivers.
Mars Sour was trading at US$57.60 a barrel at the time of writing, while West Texas Intermediate was trading at US$53.02 a barrel.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.