Near-record crude stockpiles at the U.S. Gulf Coast will anchor prices of domestic oil grades through the end of this year and into next, traders and analysts said.
Stocks along the U.S. Gulf Coast, known as PADD III, were near record levels following several weeks of cheap imports, sluggish exports and weak refining demand. Traders are concerned that the rise in coronavirus cases will keep fuel demand suppressed.
WTI crude at Houston for delivery from August to June next year ranged between a 93-cent to a $1 a barrel premium over U.S. crude futures, according to settlements on the CME. It traded at a $3.75 premium to Cushing in early May.
West Texas Sour, the sour grade delivered into Midland, traded at a 65-cent discount to U.S. crude futures in early June, its lowest in nearly two months.
Weakness in Gulf Coast prices, due to a glut of storage, has stemmed the flow of barrels to that region from inland. The amount of oil shipped from Cushing, Okla., to the Gulf Coast in May was about 15,000 bbl/d lower than in March, according to Genscape.
"They have nowhere to go. You're at minimum refining, demand is still creeping up, but you're not at maximum," a trader said.
Gulf Coast stocks hit to an all-time high last month at 308 million barrels, according to the U.S. Energy Information Administration.
Mars Sour, the benchmark for sour U.S. Gulf Coast grades, was trading at a $1.05 premium to U.S. crude futures on July 1, from a more than $4 premium in early May. Mars for December delivery currently trades at a 75-cent premium, a signal that the market sees demand for the grade to remain low through the rest of the year.
Cargo was less than can be carried by one Aframax tanker.
Oil producers in the U.S. have boosted volumes, after curbing shale well output in the spring when prices collapsed.
Trafigura has applied with U.S. regulators for permits to build an offshore crude export terminal off Corpus Christi, Texas, to transport 500,000 bbl/d of U.S. shale to buyers in Europe and Asia.