Heavy Canadian crude continued to trade at record levels in the US Gulf Coast Tuesday, buoyed by what market sources said was the combination of collapsing Venezuelan exports, the prospect of Iranian sanctions and a widening spread between Brent and WTI.
Western Canadian Select at Nederland, Texas, was assessed at a premium of $2.50/b over the NYMEX CMA, the strongest differential since S&P Global Platts began publishing the assessment in 2016. WCS at Nederland was only assessed at a premium to the CMA for the first time June 1.
One trading source Tuesday called the WCS trading levels at Nederland "unreal." Another source said the grade in Houston was likely to continue rising relative to WTI as it tracks the upward trend of other crudes, such as Mars.
Crudes along the US Gulf Coast have surged over the past week as the Brent/WTI front-month crude spread has moved to around $10/b, making grades priced off of WTI more competitive relative to Brent-based offering. A narrowing Dubai/WTI and Brent/WTI swaps spread pressured Gulf Coast sour benchmark Mars lower Tuesday by 85 cents/b to WTI cash +$4.90/b. The grade reached a $5.80/b to WTI cash Friday, the highest since January of 2014. The Energy Information Administration trimmed its OPEC oil production Outlook Tuesday by 240,000 b/d for 2018 to 32.02 million b/d and by 290,000 b/d for 2019 to 32.06 million b/d as a result of expected declines by Venezuela and Iran.
The 2018 outlook would represent a drop of 420,000 b/d from last year's average OPEC production of 32.44 million b/d.
Venezuelan output fell to 1.43 million b/d in May from 1.47 million b/d in April. Iran produced 3.81 million b/d in May, down from 3.83 million b/d a month earlier.