U.S. Gulf Coast Light-Heavy Spread at Widest in Three Months

The benchmark spread between light and heavy crudes on the Gulf Coast widened to the highest level in nearly three months as Mexico’s national oil company reduced prices to maintain U.S. market share.

The premium of Light Louisiana Sweet to Mexican Maya, the benchmark light and heavy crudes for Gulf Coast refiners, grew by $1.94 to a $9.68-a-barrel premium at 2:13 p.m. in New York, according to data compiled by Bloomberg. It’s the largest differential since March 25.

Petroleos Mexicanos, Mexico’s national oil company, better known as Pemex, reduced the K factor it uses to adjust the price of Maya by $1.90 to minus-65 cents a barrel for July.

“They have to compete with Saudi Basrah as well as increasing amounts of light, sweet crudes that are showing up on the Gulf Coast,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If the spread remains narrow, people will want to reduce their contract volumes.”

U.S. oil imports from Mexico rebounded to 973,000 barrels a day in April from 608,000 barrels a day in March, which was the lowest level since April 1990, according to U.S. Energy Information Administration data.

The LLS-Maya gap averaged $8.01 a barrel in June. It was $6.14 a barrel in May, the lowest monthly average since January 2012.

Gulf Crudes

Gulf crudes weakened versus the U.S. benchmark as the Brent-WTI spread shrank to less than $5 for the first time since Jan. 18, 2011. Gulf oils compete with foreign crudes priced against Brent for space in U.S. refineries.

The premium of LLS to West Texas Intermediate in Cushing, Oklahoma, weakened 5 cents to $7.20 a barrel as of 2:13 p.m. in New York. That’s down from a year-to-date high of $23 on March 20. Heavy Louisiana Sweet slid 15 cents to a $7 premium.

The Mars Blend premium to WTI narrowed 10 cents to $1.55 a barrel. Poseidon narrowed 30 cents to 80 cents a barrel more than the U.S. benchmark. Southern Green’s premium shrank 10 cents to 75 cents, and Thunder Horse was unchanged at $4.75 a barrel more than the U.S. benchmark.

No trades were recorded on Calgary-based oil broker Net Energy Inc. Today is Canada Day.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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