The USA is maintaining its ban on the export of crude oil, which depresses the price of WTI (West Texas Intermediate blend) as domestic plus Canadian supplies exceed demand, thus creating the WTI – Brent differential, now around $14 per bbl. However export of refined product is allowed. The result is US refiners are expanding while the European refining complex is in dire financial straits, and the future of Asian refiners is threatened….
Standard Chartered Bank Research refers, as this extract illustrates:
“Valero’s 4Q12 profit jumps 20x YoY, benefiting from cheaper crude. Valero Energy Corp (VLO US, NR) reported a 20x jump in its 4Q12 net profit to USD 1.01bn on 29 January 2013. This was mainly driven by higher refining margins from processing cheaper US crude. WTI, the US crude benchmark, was at a discount of c. USD 22/bbl to Brent in 4Q12. Valero also disclosed plan to ship additional cheaper crude via rail and barges to its refineries on the US Gulf Coast, until the Keystone XL pipeline becomes operational
Valero looking to increase product exports: Valero said it exported 110k bpd of gasoline in 4Q12, up 70% from the normalised level of 60-70k bpd. The company said it has a gasoline export capacity of 225k bpd, which it seeks to capitalise. It also disclosed plans to increase diesel export capacity to over 400k bpd from 280k bpd currently”
It is also public knowledge that Canada’s Nexen plans to avoid the US blockade on crude exports by railing crude to Canada’s West coast, for export to China, which will cause the WTI-Brent arbitrage to continue to close. Nexen is not the only producer of crude in North America seeking ways to capture the differential for itself, rather than leaving it to the refineries. Others in the US have requested export permits.
Legally permits can be granted by the US authorities but only for minor volumes and only on condition that the refined product produced from such crude is repatriated to the USA. On the other hand the Canadian crude producers only face logistical barriers in that their oil has traditionally been piped into the USA ending up in storage tanks at Cushing, Oklahoma, with no currently built route to a port. The consequent buildup of crude oil volumes at Cushing creates the Brent vs WTI arbitrage and hence Nexen’s move to rail crude to a Canadian port.
Ironically the US refineries presently capturing the arbitrage by exporting product were mostly sold by crude producers who were integrated companies, because they suffered from low refining margins in the past. Such refineries are unlikely to be able to compete with the likes of Reliance in India, i.e. modern sophisticated refineries, when the arbitrage no longer exists.
BarrettWells
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment