Oil Is The Basic Resource Of The Kazakhstan
Sources say that heavy crude prices have been supported not only by OPEC—which has reduced production mainly of heavy, high-sulfur oil—but also by relatively weak gasoline demand growth, especially in the US. As a result, many refiners in the Atlantic Basin have been processing heavier oil to tilt their product slates toward middle distillates. On July 10, Heavy Louisiana Sweet (HLS) rose to WTI plus $2.50/bbl, its strongest differential since Feb. 2015. HLS was also stronger than Light Louisiana Sweet (LLS), which was assessed at $2.30/bbl above WTI. LLS has an API gravity of about 34-41ºAPI and a sulfur content of about 0.4%. HLS’ gravity is typically around 32-33°API and sulfur at about 0.3%. Strength for heavy grades has supported sour crude as well, mainly because heavy crudes are often sour—HLS is an exception—and vice versa. Also as of July 10, the sweet/sour spread between LLS and Mars had narrowed to $2.90/bbl, with LLS’ lead falling by $1.25/bbl since the start of the year. “Sour grades are like gold dust at the moment,” said one trader. “There’s a need to fill in more sour grades heading to the US and there is huge demand from the east.” Others noted that North Sea Ekofisk, a lightweight rich in gasoline-range material, was at its deepest discount to Forties, which is heavier, in two years.
Russian and central Asian grades were affected as well. Market sources say that Kazakh national oil company Kazmunaigaz is planning to supply its refineries in Romania with cheaper Mediterranean crudes, displacing Urals. Typically, KMG ships all of its share of Urals from Novossiisk to its subsidiary Rompetrol Rafinare, which owns the 105K-b/d Petromidia refinery, the 9K-b/d Vega refinery, and Rompetrol Petrochemicals. Sources said that it would make sense for KMG to sell Urals on the spot market and look for other grades at its refineries. “Urals supply is currently limited, while there’s plenty of Azeri BTC, Siberian Light and CPC Blend,” one trader said. Urals is currently close to a two-year high relative to Brent, but other regional grades are at long-time lows. On the other hand, medium sour Oman crude’s premium to Asian benchmark Dubai crude (which is also medium sour) has narrowed considerably in Sept. because of falling demand from China due to reduced refinery runs, weaker domestic consumption, and limited exports. China is a major consumer of medium sour oil in Asia. (July 10, 11, 13, 14)