West Texas light finding a market in Europe and Canada

Bloomberg/Fuel Fix:
Exports of the Permian Basin’s newest kind of oil are set to jump as production surges, exceeding the appetite of U.S. refiners.

Sales of the new grade, known as West Texas Light, began in September, as explorers sought to separate out increasingly lighter and less sulfurous crude bubbling up from wells in West Texas and New Mexico, so it wouldn’t lessen the quality of U.S. benchmark West Texas Intermediate. WTL supply has grown to over 500,000 barrels a day, a nearly four-fold rise from last year.

While some of that is staying close by, most will need to be exported. Even as ample shale barrels and tighter supplies of heavier crudes have encouraged U.S. refiners to process the lightest oil since 1990, that may reach a limit soon. But since many of the biggest refineries have invested billions of dollars in upgrades over the years and are set up to run the heaviest, dirtiest oil, there’s only a certain amount of light oil they can handle.

"I suspect that refineries that can blend to run lighter slates are likely already doing so to the best they can," said Michael Tran, a commodity strategist at RBC Capital Markets LLC in New York. "Every incremental barrel produced in the U.S. should be earmarked for export," unless it’s a heavy crude, Tran said.

Shipments overseas began in February and have neared 1.42 million barrels through this month. Most was sent to the Netherlands and the rest for Canada, while none has headed to Asia so far, according to U.S. Customs data and ship tracking data compiled by Bloomberg.

Renewed U.S.-led sanctions on Iran could provide an opportunity. Buyers of Iranian condensates such as South Korea, might consider WTL, Jonathan Aronson, analyst for Cornerstone Marcro LLC in New York.
The Chinese tariffs will have little impact on this grade coming out of Texas.  The US does need to convert more of its refinery capacity to light crude.  It would certainly lessen the dependency on imports more than ethanol has.


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