Colombian heavy sour crudes have reached their narrowest discounts to Ice Brent in at least four years, supported by uncertainty surrounding US tariffs and tight supplies of similar grades.
Castilla's discount to Ice Brent was $3.50/bl on Tuesday and Vasconia's was at $1.45/bl, $4.40/bl and $3.15/bl tighter than on 2 January, respectively. Castilla has not reached that narrow of a level against the benchmark since early 2021 and Vasconia has not since mid-2019.
Outright prices were $60.89/bl for Vasconia and $58.84/bl for Castilla on Tuesday.
Colombian crude discounts started to narrow in January after US president Donald Trump mentioned plans for a 25pc tariff on all imports from Mexico and Canada, which produce competing heavy sours. Amid the uncertainty, buyers opted to secure supply that might not face tariffs, sources said, despite delays in tariffs implementation in early February and March.
But a sweeping executive order last week excluded energy commodities from tariffs, as well as trade covered under the US-Mexico-Canada free trade agreement (USMCA). Then on Wednesday Trump announced he will pause many of the tariffs on other products for 90 days, but no changes have been announced for energy imports.
Despite Trump's tariff exemptions on crude imports to the US, tight availability of heavy supply for US Gulf refiners could still support relative values for Colombian grades.
Subbing in
Colombian crudes are seen as good substitutes for heavy crude from the US' nearest neighbors, especially Mexican supplies, which are widely used by US Gulf coast refiners.
Additionally, Colombia's geographical location makes shipping to the US Gulf coast quicker and less costly compared with other South American countries, such as Ecuador, which also produces heavy sour crude.
Further tightening heavy supply for Gulf coast refiners, the US government announced in March that the deadline for the end of Chevron's waiver to produce in Venezuela is 27 May, stopping the flow of crude to the US from its joint venture with state-owned PdV. Chevron brought about 222,000 b/d in Venezuelan crude to the US from January-November 2024. according to the US Energy Information Administration (EIA).
Even with the volume representing a fraction of Gulf coast imports, it represents almost 30pc of total Colombian output. Its production reached 760,000 b/d in January, according to oil services chamber Campetrol, citing figures from hydrocarbons agency ANH.
Further US tariffs on countries that take delivery of Venezuelan oil and natural gas could also make Colombian barrels more attractive, although Ecuadorean crudes are possible regional supply alternatives too.
Meanwhile, Mexico's state-owned Pemex has faced quality issues with its crude production since late last year, which could lead to Gulf coast buyers turning to Colombian barrels as alternatives.
Pemex acknowledged issues with salt and water levels in its crude in February but denied that international buyers have rejected shipments because of those concerns.
Mexico's policy of expanding domestic refining has also contributed to a decline in crude exports to the US in recent years.
Colombian crude values have also likely been supported by firmer competing Canadian crude values at the US Gulf coast. Canadian crude differentials have firmed in part because of upgrader turnaround season in Alberta's oil sands region, slowing production. The shutdown of the 622,000 b/d Keystone pipeline from the region after a spill in North Dakota on 8 April also limited supply, buttressing prices.
