Analysis - Mars hit by refiner setbacks
Houston, 24 August (Argus) — US Gulf coast sour crude prices remain depressed by refinery project delays and returning production.
Shell-Aramco joint venture Motiva has had to postpone the expansion of its Port Arthur refinery in Texas to next year. The firm discovered cracks in pipes and severe damage to the new 325,000 b/d unit that, when completed, will increase Port Arthur's crude capacity to 600,000 b/d. The project also includes a large expansion to upgrading capacity that will allow the refinery to run more heavy and sour feedstocks.
The Motiva delay has reduced expected sour crude demand on the Gulf coast. Medium sour Mars has fallen to a discount of more than $4.50/bl to light sweet LLS since early June. Motiva intended to start up its new crude unit on 9 June. And a fire on 22 July forced independent Valero to shut all crude capacity at its 135,000 b/d Meraux refinery in Louisiana, further depressing medium sour demand. Meraux will not return to full capacity until early September.
Field restarts have boosted sour crude supply in the Gulf coast market. BP began producing from the Atlantis and Mad Dog fields this month after extensive and lengthy maintenance. The 200,000 b/d Atlantis field was shut throughout the second quarter. And the 85,000 b/d Mad Dog field was shut for over 15 months. The two fields mostly feed the Southern Green Canyon and Poseidon crude streams. But increasing production appears to be backing out Mars to the spot market as well.
Mars trade volumes have been rising, beginning with the market for July deliveries. Around 320,000 b/d of the grade traded in the July and August trade months, up from an average of 240,000 b/d for the April-June trade months. And at least 385,000 b/d of Mars has traded for the September trade month, which ends on 24 August. This increase in spot volumes includes the highest amount of Mars traded in a single day, 66,000 b/d on 9 August.
Mars values had risen earlier this year amid field maintenance. Production fell to 150,000 b/d in May from 265,000 b/d in April, as Shell undertook work on the offshore platform. Output has since risen, and was over 280,000 b/d in July, according to the most recently available data. Sellers may have been holding on to Mars for spot sales in case field maintenance took longer than expected.
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