Gulf Coast Light-Heavy Crude Differential Reaches Two-Month High

The spread between light and heavy crudes on the U.S. Gulf Coast widened to the highest level in two months.

Light Louisiana Sweet, the benchmark light crude on the Gulf, strengthened by $1.10 compared with Mexican Maya, the key heavy oil imported to the Gulf, to a $8.73-a-barrel premium at 4:07 p.m. in New York, according to data compiled by Bloomberg. It’s the highest level since April 3.

The widening spread could be a sign of Mexico trying to maintain its crude market share in the U.S., said Amy Myers Jaffe, executive director of energy and sustainability at the University of California, Davis.

Petroleos Mexicanos, Mexico’s national oil company better known as Pemex, adjusts the price of Maya at the start of every month to make sure the crude is attractive to buyers. The LLS-Maya spread widened $2.35 a barrel on June 3, the first trading day of the month.

“Pemex is trying to make sure their barrels don’t get backed out of the Gulf Coast, because the netback for them to sell to Asia is really terrible,” Jaffe said.

The U.S. imported 608,000 barrels a day of crude from Mexico in March, down 30 percent from the previous month and the lowest level since April 1990, according to U.S. Energy Information Administration data. The level dropped to 439,000 barrels last week, preliminary EIA data show.

Biggest Customer

“The biggest customer for Mexican crude is U.S. Gulf Coast refiners,” said Ken Medlock, senior director of the Baker Institute’s Center for Energy Studies at Rice University in Houston. “To the extent that you see demand pressures working against imports, you may see Mexico drop prices a little to try to maintain market share.”

The LLS-Maya gap averaged $6.14 a barrel in May, below an $11.46 mark over the past year and the lowest monthly average since January 2012.

The premium of LLS to West Texas Intermediate in Cushing, Oklahoma, grew 50 cents to $9.50 a barrel. That’s down from a year-to-date high of $23 on Feb. 22. Heavy Louisiana Sweet increased 40 cents to a $9.60 premium.

Mars Blend and Poseidon premiums to WTI widened 35 cents to $4.50 and $4, respectively.

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