Light Louisiana Sweet crude tumbled against West Texas Intermediate after spot contracts rolled into March, giving up strength built by a rally over the last month.
LLS for March delivery was $5.50 a barrel more expensive than WTI for the same month as of 2:11 p.m. New York time today, compared with a $10 premium based on February contracts on Jan. 24, according to data compiled by Bloomberg. Other Gulf Coast crudes like Heavy Louisiana Sweet, Mars Blend and Thunder Horse posted similar moves.
“Given the large backwardation in LLS, the misalignment is creating the perception of a major shift in U.S. differentials,” according to a research note today by Morgan Stanley Research analysts including Adam Longson. With LLS rolling, “prompt contracts should realign across benchmarks, but spot markets may still reflect tight conditions in the Gulf.”
Gulf crudes weakened last week after TransCanada Corp. announced the startup of the southern leg of its Keystone XL pipeline and began deliveries to Texas from Cushing, Oklahoma. The line is now transporting 288,000 barrels a day of U.S. light, sweet oil to Nederland, Texas, adding to crude supplies in PADD 3, the Gulf Coast region.
Heavy Louisiana Sweet was at a $6 premium against U.S. benchmark WTI, compared with $11.50 based on February contracts on Jan. 24, Bloomberg data showed.
Bonito Sour and Eugene Island both weakened $3.90 from the February premium on Jan. 24 to $4.10. Mars Blend for March was $2.50 above WTI, compared with $7 for the February contract last week. Poseidon crude for March was at $1.80 above WTI, compared with $6.25 last week for February.