September Pricing Analysis - North American Crude

SUMMARY

WTI (DSW) Cushing Cash averaged $96.61/bbl, up 16.88% on August, on a rally that began on 10 September when attacks shut the Saudi East-West pipeline; every US-produced grade peaked on 15 September. The second half gave part of it back as Saudi crude moved through Hormuz again and the pipeline restarted on 22 September. Medium sour carried the swing: on the same November barrel, Mars went from $4.50 over the Cushing Cash Formula on 1 September to $0.25 under on 30 September. Heavy crude weakened after the Joliet refinery, a buyer of Canadian heavy, lost power on 13 September. October opened with Gulf sour at a discount and Cushing stocks rebuilt to 24.3 million barrels (EIA).

MARKET ACTIVITY

• Mars volume fell 29.68% while Canadian barrels traded more at Houston.
• GX Mars traded volume averaged 13,060 bbl per session (-29.68%) and SGC 15,751 (+1.47%).
• On the aggregate of the month's trades (not published index volumes), Cold Lake at Houston rose 53.7% to 14,240,700 bbl, consistent with Canadian barrels moving south during the outage.

PRICE ACTION

• Cushing Cash averaged 16.88% above August on a rally that peaked on 15 September.
• WTI (DSW) Cushing Cash averaged $96.61/bbl against $82.66 (+16.88% MoM; +51.87% YoY against $63.61); high $105.83 on 15 Sep, low $89.38 on 29 Sep.
• The rally began on 10 Sep, the day of the pipeline attack, when Cushing Cash gained $6.43. The October barrel fell to $99.12 by 25 Sep.
• The front moved to November delivery on 28 Sep, when October stood $6.71 over November, so that day's $6.52 fall was the delivery switch: the November barrel rose $0.19.

CROSS-MARKET DYNAMICS

East Houston held at or above ex Basin on 14 of 21 sessions while Gulf sour lost its premium.

• WTI ex Basin vs WTI Midland averaged +$0.67 (August +$0.39) and WTI East Houston vs WTI Midland +$0.78 (August +$0.31). East Houston vs WTI ex Basin was at or above zero on 14 of 21 sessions against 6 in August: the export-facing barrel cleared above both inland grades.
• Gulf sour began the month at a premium because Saudi supply fell to 5.97 mb/d in August with more than 10 mb/d of Gulf output shut in (IEA). Mars vs the Cushing Cash Formula peaked at +$6.75 on 16 Sep, then fell $2.91 on 21 Sep as Saudi shipments through Hormuz rose.
• US arrivals were not the cause: Saudi crude imports fell from 362 to 74 kb/d between the weeks to 11 and 25 Sep (EIA).

CROSS-REGIONAL DYNAMICS

Canadian Sour lost about $5 to light sweet at both hubs after Joliet shut.

• On the same November barrel, Canadian Sour Cushing went from $11.82 to $17.47 under the Cushing Cash Formula and Canadian Sour Houston from $12.52 to $17.62 under WTI East Houston. Joliet runs heavy Canadian crude; Midwest utilization fell from 100.0% to 85.6% after it shut (EIA).
• The Cushing end weakened more: Canadian Sour Cushing vs Houston widened to -$1.19 from -$0.85.

CURVE STRUCTURE

Back repricing at Cushing: M12 gained $3.94 while M1 moved $0.20; Mars saw a front collapse.

• Cushing stocks rose from 21,482 to 24,301 thousand barrels between the weeks to 11 and 25 Sep (EIA), easing the front while the back repriced up. Mars M1 fell $6.18 against $0.56 for M12.

PRICE VOLATILITY

Dispersion rose from August's lows, most for Canadian Sour Houston.

• Canadian Sour Houston rose to 6.19 from 3.77 as the outage hit heavy demand; all three stay near half their June levels. Cushing Cash's 5.25 includes the 28 Sep delivery switch.

SOMETHING TO WATCH

• Gulf sour after Saudi flows returned:
  • Observation: on the November barrel, Mars closed $0.25 under the Cushing Cash Formula, from $4.50 over on 1 Sep.
  • Why it matters: the premium rested on Middle East sour missing from Atlantic markets; with the pipeline back since 22 Sep, Gulf sour is likely to price at or under Cushing in October.
  • What to monitor: Mars and GCSI vs the Cushing Cash Formula; EIA imports from Saudi Arabia and Iraq.
• Canadian heavy after Joliet:
  • Observation: Joliet was back online by 26 Sep; on the November barrel, Canadian Sour Cushing closed $17.47 under the Cushing Cash Formula, as on 25 Sep.
  • Why it matters: a discount that holds as runs recover has a cause beyond the outage.
  • What to monitor: EIA Midwest utilization; Canadian Sour Cushing vs Houston.
• Cushing stocks:
  • Observation: stocks rose 2.8 million barrels in two weeks to 24,301 thousand (EIA); M1-M12 narrowed to $13.64 from $17.38.
  • Why it matters: further builds would narrow the front spreads, with M1-M2 at $2.00.
  • What to monitor: EIA Wednesday Cushing stocks; Cushing Cash M1-M2.

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.