Rising US production of light sweet crude was likely destined to be the most competitive grade in Europe, regardless of a recent shift in global trade flows caused by Russian sanctions, according to trading firm Gunvor.
WTI from Midland, Texas, was first included in Argus' North Sea Dated assessment in May 2023 and has boosted liquidity in the North Sea benchmark.
"There was a concern that WTI was dislocated from the global benchmarks from the past," said Gunvor's general manager David Garza at the Argus Americas Crude Summit in Houston, Texas. But that is not much of an issue anymore with more production getting to international markets, particularly Europe.
"There's been more transparency and liquidity than before WTI," he said.
And more volume from west Texas is likely en route. Garza expects around 500,000 b/d of additional production for 2024, "maybe a little more," with Canada adding to that as well.
"I think this will continue to be an export business for the marginal barrel," he said, with domestic options not keeping pace with the additional volume. "[US Gulf coast refiners] are kind of maxed out in the sweets they can run."
It is uncertain what impact recent consolidation in the oil and gas industry may have on production, but Garza is interested in what happens to private companies since most deals have been between public companies that are more transparent.
"To me [big public companies] tend to be more disciplined in their capital expenditures," said Garza. "So, it's a question of what happens on the private side" and are we going to see a bunch of mergers there.
Canadian producers are also poised to bring more volume to market once the federally-owned 590,000 b/d Trans Mountain Expansion (TMX) pipeline comes online in the coming months, directing some crude to the Pacific coast rather than through the US. Operators have their eyes on Asia-Pacific but Garza expects some of that volume will stay closer to home.
"My feeling is that there's going to be producers that want to make a point and a statement" by going to Asia when TMX comes online, said Garza. "[But] I feel fundamentally that that barrel will find a home in Padd 5" like Washington and California. That will lead to Latin American grades, like those from Ecuador, being pushed out, Garza said.
