Louisiana Light Sweet

Two months ago, U.S. crude oil exports skyrocketed, and they have averaged 1.6 MMb/d since mid-September, driven by a Brent-WTI differential above $6/bbl — higher than it has been in over two years. At one point, the steep differential and surging exports were blamed on Hurricane Harvey, then on renewed OPEC discipline and a political risk premium associated with a shakeup in the Saudi hierarchy. But the reality is that these factors are only small pieces of the equation, with pipeline transportation bottlenecks from Cushing and the Permian down to the Gulf Coast being much more important factors in the widening Brent-WTI price spread. Today, we begin a blog series examining how these pipeline capacity constraints triggered the expanded price differential, and how the differential then enabled high crude oil export volumes.

Since last winter, the price gap between light crude oil and heavy crude — otherwise known as the light-heavy differential — has narrowed considerably. In February, the price difference between Louisiana Light Sweet crude (LLS) and heavy Maya crude on the Gulf Coast was almost $10/bbl, providing an advantage to refiners who have invested in cokers and other equipment that allows them to run a heavier crude slate. But since June Maya has on average sold for only about $5/bbl less than LLS. Today we examine the shrinking price gap between light and heavy crude and its effect on coking and cracking margins.