American refiners in need of heavy crude oil won’t be getting a break anytime soon, as supplies keep getting tighter.
Heavy, higher-sulfur crude on the U.S. Gulf Coast surged in value Monday as Saudi Arabia was said to extend its deeper production cuts through April.
Meanwhile, a power outage that darkened most of Venezuela through the weekend curtailed output from the nation’s already-fragile oil operations. Venezuela’s production may have fallen by half temporarily to about 500,000 barrels a day, consultant Energy Aspects Ltd. said in a note to clients.
The latest events further constrained a heavy crude market already feeling the pinch from supply cuts by OPEC and its allies, Canadian curtailments, and reduced exports from Venezuela and Iran because of U.S.-led sanctions.
Refiners that have spent billions of dollars upgrading their plants to process the lowest-quality grades of crude are turning to other Latin American nations and Canada for the kinds of oil they need most.
High-sulfur Mars Blend crude was just 40 cents a barrel below Light Louisiana Sweet, the narrowest gap since 2011. Western Canadian Select, a heavy, high-sulfur oil from Alberta, was valued at about $3.75 a barrel above U.S. benchmark West Texas Intermediate crude for delivery in April at Nederland, Texas, according to people familiar with the matter.
Back in December, it was worth at least $2 a barrel below WTI, two of the people said.
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