December 22, 2023 [Argus]- West Texas Intermediate (WTI) crude at the US Gulf coast has moved to a 10-month high in late-month trade with the help of strong economics to export crude.
WTI Houston rose against the US light sweet crude benchmark at Cushing, Oklahoma, by 78¢/bl from the week prior to a volume-weighted average premium Tuesday of $2.33/bl — its strongest premium since 23 February. The grade sold again at a $2.30/bl premium to the Cushing basis today and was discussed this morning at premiums between $2.60/bl and $2.80/bl.
Spot crude differentials often fluctuate toward the end of the cycle as traders exchange their positions from prompt month to the following month, but the spot value for WTI at the coast has been trending higher since the 27 November start to the January US trade month amid overall tighter supply.
January WTI Houston has averaged a $1.64/bl premium to the Cushing basis so far, up sharply from the average $1.03/bl premium for December trade and a 90¢/bl premium in the November trade month — when US market participants began unwinding crude inventories to lessen the burden of end-of-year ad valorem taxes.
Now, spot values are also drawing strength from stable demand out of Europe, where WTI cargoes sold on a delivered basis are currently trading more than $1/bl stronger than the level at which cargoes are being marketed on a free-on-board (fob) basis at the US Gulf coast.
WTI at the Netherlands port of Rotterdam was bid as high as $2.25/bl over the North Sea Dated benchmark on Tuesday, which would have reflected a roughly $1.85/bl discount to March Ice Brent on an equivalent fob basis at the US Gulf coast. WTI fob US Gulf coast, however, was still hovering at discounts to March Ice Brent ranging from $3.30/bl to $3.10/bl in a relatively quiet market ahead of the holidays.
North Sea Forties was meanwhile bid at a $1.10/bl premium to Dated Tuesday, or just about 15¢/bl lower than freight-adjusted WTI values despite a heavier quality expected for the more regional crude in the first four months of 2024.
The export demand for WTI is also leading to a wider logistical spread between the Permian basin and the Texas Gulf coast. WTI Houston increased its premium to WTI Midland by 23¢/bl on the week to trade 48¢/bl over the Permian location Tuesday, reflecting a one-year high and prompting more optimistic traders to say the wider spread could be “here to stay” if the Cushing market remains at a disconnect to spot trade at the coast.
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