USGC Mars grade to benefit as refinery cracks lift
‘- As crack margins have improved, simple and complex refiners in the Far East have maintained positive margins on Mars grade, while Arab Light (as a proxy for the limited AG crude volumes that do come available) remain unworkable for medium sour grades.
– Within WCI, Mars has lost competitiveness relative to global medium sours. Arab Light, serving as a proxy for AG grades, remains more attractive on a marginal basis for simple complexity refiners than Mars. This dynamic persists against the broader context of growing Russian crude imports into India and limited AG availability.
– NWE complex refinery margins have continued to remain supportive for Mars.
– As noted by Michael Ryan, TD22 VLCC rates are set to remain relatively neutral despite structurally bullish crude fundamentals as tonnage remains neutral.
– USGC FOBs have maintained competitiveness on the back of continued SPR releases. The most recent DOE report, dated April 17th, indicates that sour grades represent 62.7% of total remaining SPR inventory, with Volume 1 releasing in excess of 9.8 mn bbls in April. As the preponderance of remaining SPR stock is sour in quality and subject to wider discounts, further release activity is expected to sustain the competitiveness of sour grades in the market.
– Beyond USGC-specific fundamentals, many global grades remain widely unattractive to simple refiners across both the Far East and NWE, spanning light/medium and sweet/sour categories. Though medium and complex refiners have seen some improvement. As noted by Neil Crosby in the EMEA outlook, the key question facing the market is whether the loss of refined product demand will outpace the loss of crude supply. Given the marginal outlook for refining, crack spreads continue to look undervalued at current levels.
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