Light Louisiana Sweet oil on the spot market weakened to its lowest premium to West Texas Intermediate since October 2010 as tropical weather faded and more light shale oil makes its way to the Gulf Coast.
Tropical Storm Erin in the Atlantic Ocean and a low-pressure system in the Gulf of Mexico dissipated over the weekend, reducing fears of a supply disruption. Oil production in Texas’s Eagle Ford shale formation rose 58 percent to 581,923 barrels a day in May from a year earlier, according to preliminary data from the Texas Railroad Commission.
“LLS is going to find competition now coming from other areas of U.S.,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “American crudes are all starting to balance out a little bit. As long as imports remain expensive, we’re going to see see more and more ways bring shale oil down to the coasts.”
LLS weakened by 25 cents to $3 a barrel more than WTI at 2:07 p.m., the lowest level since Oct. 26, 2010. Heavy Louisiana Sweet’s premium also fell 25 cents to $2.75.
The port of Corpus Christi, Texas, shipped out 348,000 barrels of crude a day in May, up from 48,000 barrels a day in May 2012, according to data from the port.
The Louisiana Offshore Oil Port LLC in Clovelly, Louisiana, the largest waterborne petroleum import terminal in the U.S., received 3.7 million barrels of oil from Texas in May, more than from any foreign country except Saudi Arabia, according to the state’s Department of Natural Resources. LOOP received its first tanker of domestic crude in August 2012.
LOOP is connected by pipeline to St. James, Louisiana, where LLS is delivered. Shale oils from Eagle Ford and the Bakken in North Dakota are low-density and have relatively little sulfur, like LLS.
Mars Blend weakened by 25 cents to a $2.50-a-barrel discount to WTI, the largest in almost three years. Poseidon’s discount widened by 50 cents to $2.25 a barrel. Southern Green’s discount grew by $1.75 to $3.50, and Thunder Horse weakened by $1.50 to a premium of $1.75 a barrel over WTI.
In Canada, Syncrude remained unchanged at a premium of $3.30 a barrel to WTI while heavy Western Canada Select weakened by 50 cents to a $24.50-a-barrel discount to WTI.