Crude oil exports hit 5.6 MMb/d last week, the second-highest level in EIA stats ever. Exports in the first six months of the year have averaged 4.1 MMb/d, 28% — or nearly 1 MMb/d — higher than the same period in 2022. And with Midland WTI crude now deliverable into global benchmark Brent, even more exports are on the way. Which makes it ever more important to understand how physical spot crude oil is priced at Gulf Coast export terminals. After all, exporters only move crude off the dock when they can make money doing so — well, at least most of the time. And that depends on what it costs to get a given crude grade to the dock, what it’s worth when it gets there, the cost of shipping to overseas destinations, and the price realized when the cargo lands there. To shed more light on those export economics, in today’s RBN blog, we continue our exploration of crude oil pricing in the markets for physical U.S. and Canadian crudes.
Canadian crude output is rising, requiring new export routes. As traditional pathways face constraints, the U.S. Rockies—especially the Guernsey, WY hub—are emerging as key corridors for moving Canadian heavy crude to downstream markets, including the Gulf Coast.
For one of the best examples of crude price fundamentals analytics we can pick, let’s jump straight to the epicenter of U.S. crude exports: Corpus Christi, the source for 59% of U.S. crude exports so far this year, exceeding the total exports from Houston (24%), Beaumont/Nederland (6%) and Louisiana (11%). You might think that exports out of Corpus are so high in part because barrels there are cheaper than those at other terminals up the coast, but not so. As shown in Figure 1, Corpus barrels averaged $0.17/bbl over the Houston benchmark Magellan East Houston (MEH) last year (left side of red line in left graph), and that premium has moved up to $0.26/bbl in the first six months of 2023 (right side of red line). In fact, the right graph shows that on a daily basis, the differential has moved even higher over the past two months, to average $0.29/bbl last week.
The strength of Corpus barrels can be attributed primarily to two factors. The first is quality, or better said, perception of quality. (We’ve been covering quality issues recently in O Captain, Mercaptan! and Iron Man.) That’s because, as we covered in Trading in the USA, most of the pipeline crude coming into Corpus for export is via Plains-operated Cactus, Enbridge-operated Gray Oak, and the EPIC Crude system, all of which offer straight shots from the Permian to Corpus-area docks. In contrast, Houston WTI has traditionally been more likely to be blended with crudes from other regions since Permian crude is staged in multi-pipeline-connected storage before delivery to docks for export. Second, the Corpus Ingleside docks, the source of most of the export growth over the past three years, can partially load VLCCs, providing significant per-bbl freight savings to Asia and Europe (see I Need You). Together the quality and shipping economics issues create a strong demand pull for Corpus barrels. And it is that demand that drives the Corpus price differential premium versus MEH. In fact, the short-term behavior of the Corpus differential can be an effective leading indicator of export cargo volumes.
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About the song
“Swap It Out” was written by Justin Bieber, Jason Boyd, James Giannos, Dominic Jordan, Jamal Rashid and Ashley Joi Sadler and appears as the 14th song on Justin Bieber's second compilation album, Journals. The song’s lyrics focus on the complicated maneuvers that go into making a relationship work. Personnel on the record were: Justin Bieber (vocals), and Poo Bear and the Audibles (programming, sequencing, sampling).
Journal was recorded at various studios in 2012-13 and was produced by Justin Bieber, Scooter Braun, Usher, Poo Bear, Major Soundz, the Audibles, Chef Tone, T-Minus, Diplo, Dark Child and Sir Nolan. The album favors R&B-flavored songs with a slower tempo that focus on lyrics dealing with heartbreak and forgiveness. It was speculated that many of the tunes were inspired by Bieber’s breakup with Selena Gomez. Under a digital download promotion called Music Mondays that launched in October 2013, a new song from the album was dropped each Monday in the 10 weeks prior to the LP’s release. The album itself dropped in December 2013, but did not go on the Billboard charts due to it not being submitted to Neilson's SoundScan for sales tracking. It has been certified Platinum by the Recording Industry Association of America. Ten singles were released from the LP.
Justin Bieber is a Canadian pop singer. He was discovered by American record executive Scooter Braun in 2008. In 2009, Bieber released his debut EP, My World, which helped to quickly propel him to teen-idol status. He has released six studio albums, three compilation albums, two EPs and 75 singles and has sold over 150 million records worldwide. He has had eight #1 singles on the Billboard Hot 100 Singles chart and eight #1 albums on the Billboard 200 Albums chart. Bieber has starred in four documentaries and appeared in one motion picture. He has won 18 American Music Awards, 22 ASCAP Awards, 26 Billboard Music Awards, two Brit Awards, two Grammy Awards and six MTV Video Music Awards. He was recently diagnosed with Ramsey Hunt syndrome type two, which causes temporary facial paralysis, but has recovered and continues to record, with touring plans in the future.
Comments
Gents, as always great article and great blog series. Side comment - proof this latest blog as there is the use of DWS insteads of DSW throughout the article. Thank you.
In reply to great article by javier del olmo
We got it fixed. Thanks for the heads up.