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Gulf Crudes Strengthen as WTI Falls on Smaller Refining Margins

Light Louisiana Sweet and other crudes from the Gulf of Mexico strengthened relative to West Texas Intermediate as the U.S. benchmark fell amid weakening refining margins.

LLS, the benchmark price for light, sweet oil on the Gulf Coast, strengthened by 65 cents to a premium of $3.10 a barrel to WTI at 1:59 p.m., according to data compiled by Bloomberg. It’s the highest premium has been since Sept. 5.

WTI for November delivery fell as much as 1.8 percent today, and its discount to European benchmark Brent widened to as much as $6.47 a barrel, the highest level since Sept. 6. LLS and other Gulf oils compete with foreign crudes priced against Brent for space in coastal U.S. refineries.

WTI’s discount to Brent has widened as smaller margins have prompted U.S. refineries to slow rates. The front-month 3-2-1 crack spread fell to $11.02 a barrel on Sept. 23 from $41.74 on Feb. 22. Midwest refineries processed 3.49 million barrels of crude a day the week ending Sept. 20, down from 3.58 million the week of Aug. 23. Gulf Coast refineries ran 8.07 million barrels a day, down from 8.47 million the previous week.

“Even if margins were not in the red, the fact that they had come off by nearly 90 percent from their peaks was enough to deter refineries from running their kit to the fullest,” Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London, said in a research note to clients today. “At current crude price levels and margins, refineries are unlikely to be in a hurry to raise utilization rates to record highs again.”

Mars Blend, a medium, sour crude, strengthened by 60 cents to a discount of $1.85 a barrel to WTI. Poseidon’s discount shrank by 55 cents to $2.70 a barrel. Crude from the Southern Green Canyon strengthened by 50 cents to a $3-a-barrel discount.

Heavy Louisiana Sweet strengthened by $1 to a premium of $4.20 a barrel more than WTI. Thunder Horse crude gained $1.15 to a premium of 75 cents a barrel.

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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