Americas have glut of heavy oil due to freight squeeze; Asia, Europe scramble for barrels
USO•Heavy crude is accumulating in the Americas as soaring tanker costs and near-capacity US refineries curb exports, while buyers in Asia and Europe face shortages. Shipping a barrel from the Americas to Asia cost about $40 last week, and Canadian, Colombian and Ecuadorian heavy crude grades have fallen more than $10 a barrel in six weeks.
1. Freight squeezes exports
Heavy crude is piling up in the Americas as higher freight rates stifle exports and US refineries run close to their limits. The tanker cost from the Americas to Asia rose to more than $80 million, or about $40 a barrel, last week, compared with around $10 million to $15 million near the start of the year. Shipping from the US Gulf Coast to Europe was estimated at $24.50 a barrel last week, up from about $4 before the Iran war broke out in late February.
2. Refineries near capacity
US refineries have operated at an average 93.5% of capacity so far this year, the highest level in 28 years, as they produce fuel amid record-high diesel prices. Canadian, Colombian and Ecuadorian heavy crude grades have each fallen more than $10 a barrel in six weeks, reaching six-week lows. Western Canada Select was around $74 a barrel, Colombia’s Vasconia around $84 and Ecuador’s Oriente around $76 on Thursday; Venezuelan crude was around $74.50, excluding shipping costs.
