Crude and condensate exports from the US to Northwest Europe are on track to hit a record high in July, according to data from S&P Global Commodities at Sea, on improving arbitrage economics, high US production and strong European refinery runs.
Total crude flows on the trade route have reached 1.6 million b/d so far in July, up from 1 million b/d in June and matching the previous record highs in December, January, and February, CAS data shows.
Brief port closures in Texas were reported in June due to a storm as the 2024 hurricane season began, while market participants were seeing better margins in buying US barrels and selling them in Europe.
In a note on July 25, S&P Global Commodity Insights analysts assessed the arbitrage incentive for selling West Texas Intermediate from the Magellan East Houston terminal in Rotterdam at 24 cents/b in July, up from minus 83 cents/b in June.
The improvement came as Aframax dirty tanker rates for shipping a 70,000-mt cargo have averaged $36.2/mt in July, down from $40.6/mt last month, according to Commodity Insights’ Platts data.
“Rates came under pressure in the latter half of June as charterers shifted toward larger VLCCs and Suezmax for voyages to Europe,” Commodity Insights analysts said in a separate note.
US crude production at 13.3 million b/d on the week ended July 19 was unchanged on the week, but up 200,000 b/d since late May, US Energy Information Administration data shows. Commodity Insights analysts expect US annual output growth of roughly 387,000 b/d in 2024 to an average of 13.31 million b/d and output growth of 739,000 b/d in 2025.
Europe’s appetite for sweet crude remains strong due to high refinery runs, which are expected by Commodity Insights to rise from 11.8 million b/d in June to 12.2 million b/d in July and 12.3 million b/d in August due to a seasonal upturn.
European crude-processing volumes “are set to exceed all-time highs later this year,” Vitol said on a LinkedIn post recently.
The WTI and WTI Midland grades, which are light and sweet, have accounted for 82.6% of US crude exports to Northwest Europe in July, based on CAS data.
Nigeria, which also produces light, sweet crude, lowered its crude exports to Northwest Europe to 256,000 b/d in July from 387,900 b/d last month.
The West African’s new 650,000-b/d Dangote refinery has been gradually increasing its utilization this year, with domestic supply accounting for more than 70% of its crude feedstock.
Source: S&P Global
