Increasing volumes of WTS Midland are being blended with condensate to WTI NYMEX contract specifications to compete with Domestic Sweet Blend crude, according to industry sources familiar with the Gulf Coast market.
In recent months, DSW has increasingly been favored over WTI MEH as the light sweet crude of choice to export to Latin American countries and the Caribbean where it is used in blending.
While lower in quality than pure WTI Midland crude, the WTS and condensate blend is of a similar quality to DSW.
Heard valued between WTI cash plus 20 cents/b and 30 cents/b, DSW at ECHO is cheaper compared with WTI MEH, which is currently assessed at WTI cash plus $1.15/b. WTS Midland, by contrast, is currently assessed at WTI cash minus 45 cents/b, and Eagle Ford condensate FOB Houston is currently assessed at WTI CMA minus 37 cents/b.
Despite lingering refiner demand for more sour crude due to the shortages brought about by Canadian wildfires, more and more Midland sour is being used to blend with condensate to make WTI, one Gulf Coast trader said.
Further, with gasoline demand expected to remain strong moving into the fall, there will likely be steady buying of light sweet grades, according to market sources.
That makes WTI Midland’s concentration of light distillates desireable, but perhaps too expensive. At the same time, DSW’s distillation curve can lend less desirable results, but is more affordable.
This represents an opportunity for the new blend.
“Margins are getting a bit thin in the Gulf Coast and US Atlantic Coast regions,” said an industry source familiar with the regional market. These thin margins are causing refiners to buy cheaper crude to blend, he added.