Oil traders are scrambling to secure quickly dwindling supplies of light, sweet crude in the U.S. Gulf Coast, signaling potential declines from shale production and propping up the U.S. market as a clear destination for foreign imports, Reuters reports.
Even as traders contend with less light crude, the region remains flooded with sludgier barrels of heavy crude that are harder for some refineries to process. As a result, the spread between Light Louisiana Sweet and Mars Sour widened to $5.30 a barrel on Tuesday—the most in 11 months, according to Reuters data.
The tightness in the market for sweet grades can be explained by a few short-term issues, including an unexpected outage at a major Canadian facility that produces light crude, planned pipeline work and higher prices from North Dakota’s Bakken shale play.
Underlying the tighter market, though, may be production declines, according to analysts from Citibank, which has said that “the U.S. crude market is feeling tight even as refiners enter turnarounds.”
Storage data suggests crude markets are well supplied, with nearly 457 million barrels in storage, down slightly from the highs seen in April but still at record levels. Stocks at the storage hub in Cushing, Oklahoma, were at 56.41 million barrels the week ended Sept. 4, down from a record high of 62.2 million barrels in mid-April, according to data from the Energy Information Administration.
