The role of the US Atlantic market in clearing crude oil barrels from West Africa and Europe is likely to diminish through August as a result of a local refineries taking in more domestic crude by rail and water and a softer WTI complex, according to industry sources.
Imports of crude into the region in May and June were relatively flat, with June imports 1 million barrels less than May. However, despite high run rates and relatively strong product cracks, record domestic production has softened the WTI complex, limiting import requirements to niche barrels used for blending or tailored to the requirements of certain refinery systems.
US Atlantic market imports in May and June reached 24 million and 23 million barrels respectively, data from the Energy Information Administration showed.
Arrivals of WAF grades totaled 11.1 million barrels in May and 10.6 million barrels in June.
Imports from Kazakhstan, Libya, Norway, Russia and Algeria combined totaled 6.4 million in June and 1.61 million less in May.
“The Atlantic Basin seems oddly weak,” a trader said, adding that refineries were “running all out.”
“Refining margins are just under last year’s levels, so not terrible. We are approaching the North Sea offshore maintenance season so I’d thought we would see a stronger market,” the trader said.
US production remains above 10 million b/d and exports north of 3 million.
Refinery utilization rates last week rose 0.8 percentage points to 97.5% of capacity, according to EIA data.
For some, a lack of pull from China and record high US production has put pressure on the region.
The effect has been softer margins, limiting the appeal of arbitrage barrels into the US Atlantic Coast, effectively now a weak market based on the latest market sentiment.
“The arb is still rather narrowed,” the trader said.