US cash crude differentials mostly weaker as arbitrage narrows

08 Jul, 2013

NEW YORK: Cash crude differentials in the United States mostly weakened on Monday as the trans-Atlantic spread narrowed, traders and brokers said.

Brent crude's premium to US crude <CL-LCO1=R> ended at $4.29 a barrel based on August contract settlements. The spread between those contracts ended at $4.50 on Friday.

Brent's premium ranged from $3.78 to $4.76 on Monday.

Usually, the wider the arbitrage, the more supportive it is for US cash crude differentials, while a narrower spread often pressures differentials. This especially holds true for sweet grades, which are priced in line with global waterborne crudes such as Brent.

Crude futures also seesawed before ending lower as concerns about supply from Libya and Iraq were eased, while continued unrest in Egypt gave oil prices support.

While not helping to strengthen cash crude differentials to the benchmark futures, traders and analysts said losses for crude futures were limited on Monday by concerns about an oil-tanker train disaster in Canada.

Light Louisiana sweet <LLS-> crude oil for August delivery traded on Monday from $5.90 to $6.05 over the benchmark US August crude futures.

Those differentials were weaker after Friday's trades at $6.20, $6.35 and $6.40 over the benchmark futures.

Heavy Louisiana sweet <HLS-> traded at $5.25 and $5.30 over the benchmark futures, weaker than bids from buyers pegged at $5.80 over on Friday.

Mars sour <MRS-> crude, a Gulf of Mexico-produced grade, traded at 15 cents under, flat and 5 cents over the futures benchmark, after trading on Friday at 20 cents over.

Eugene Island <EIC-> crude traded at $3.00 over the futures benchmark, weaker after trading on Friday at $3.10 over the benchmark.

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