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Sweet/Sour spreads…EIA

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December 3, 2021 by Jim Colburn Leave a Comment

 

From the EIA’s Today in Energy:

”One contributing factor to the widening spread between sweet and sour crude oils is the increasing supply of medium and heavy sour crude oils. OPEC has been increasing its production and exports since the second half of 2021, particularly in countries that produce sour grades. Unlike the sour crude oil supply that has been increasing, supply from OPEC members that produce mostly sweet crude oils has been relatively flat. Likewise, U.S. production in the Lower 48 states (primarily sweet crude oil) has also been relatively flat.”

A second contributing factor to the widening spread between sweet and sour crude oils is higher natural gas prices. The hydrogen used to treat sour crude oils is often produced using steam methane reforming, a process that uses natural gas as an input. As a result, the recent increases in global natural gas prices have contributed to higher refinery feedstock costs. Higher costs have led to lower demand for sour crude oils that incur more of these costs, at the same time increasing demand for sweeter crude oils that avoid these extra costs.

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Commodity Research Group (CRG), founded by veteran analyst Edward Meir, is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct commodity hedging strategies.

Our associates bring decades of experience to the table, as they seek to help our clients understand the markets. CRG will distill the myriad of pricing variables mentioned above into coherent research that is to-the-point and tailored to a clients hedging or pricing needs. In addition, CRG is available for consulting assignments and speaking engagements. CRG does not manage money or trade for itself.

 


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