Quality matters… IEA

This from the IEA’s Oil Market Report, here…

“Long before the US shale revolution took off, Gulf Coast refiners had invested in equipment to process barrels expected to get heavier and sourer. Instead, Venezuelan supplies dwindled, as did Mexico’s, and Saudi exports to the US fell sharply as they turned their attention to fast growing Asian markets. Meanwhile, Canadian exports, mainly of heavier, sourer crude, poured into the Gulf to partly fill the gap. In addition, despite the preference of refiners for heavier crudes, huge volumes of cheap shale oil became available because exports were not allowed and stocks built up to record levels. In time, the US export ban was lifted and producers could sell oil abroad at significantly higher prices. Therefore, Gulf Coast importers would continue to need the kind of crude produced by Venezuela and some Middle Eastern countries.

With heavy barrels being removed from the market, refiners have to pay more. The premium of Light Louisiana Sweet crude over Mars crude has fallen to below $1/bbl from more than $4/bbl in November. Since the US sanctions against Venezuela were announced, the premium of Mars over WTI has soared from $4.50/bbl to over $7.50/bbl.”