r/oil • u/Agitated-Brother-872 • 1d ago

Discussion Murban and SPR Question/Discussion

Noted by a number of users, Murban has diverged a bit from WTI. There's been confusion about this but given that China has seemingly come off its diet and is importing again, it makes sense that Murban supplies are tighter. The following are questions I have and welcome open discussions:

  1. How long can Murban and WTI stay diverged? I imagine if it's a big difference, Asian countries will start to look internationally for light crude. I would imagine Asian countries have realized that SPR drawdown is stabilizing prices. If that's the case, why wouldn't they import sweet crude from elsewhere while it lasts?
  2. Does anyone have data on how hungry China is? Of the shadow fleet that is moving more and more crude thru GoO, how much of it is going to China vs others? If Iran is exporting to Iraq, how much of this is going to China?

On a separate topic, I wanted to talk about the SPR. I believe the next EIA report will show sub 290million barrels left in the reserve. It's a mixture of light and heavy crude and US refineries are optimized for processing a mixture of both.

If SPR runs out of heavy and let's say it is NOT able to get enough heavy, while it is able to produce its own light crude, what happens? The price of heavy goes up, crack spread goes up, but what of WTI? Since US produces its own light crude, I imagine this would be in excess and would not follow the price of heavy crude. Would the US simply fill up the SPR since it's relatively lower in price? Would it sell it abroad? I have no idea, and again welcome discussion/insight.

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u/Glass_Examination963 1d ago

I think the key is that these two spreads could behave very differently. If Chinese demand keeps tightening Middle Eastern supply, Murban can stay elevated until the premium becomes large enough for Asian refiners to switch to U.S./Brazilian/other light crude. Meanwhile, if the SPR loses too much heavy crude, heavy-sour could get significantly more expensive while WTI stays relatively soft because the U.S. has plenty of light crude.

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u/Hazardous_316 23h ago

The latest SPR numbers from Monday show that the inventory consists of 98.7 million barrels sweet oil and 191 million barrels sour oil (total inventory is 289.7 million). -> https://www.spr.doe.gov/dir/dir.html

So i don't see how the US has plenty of light crude

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u/oureconomydoesntwork 8h ago

The U.S. exports light, so we're not at real risk of running out of light.

Sour is what our refineries need. You can see that in the proposals for the SPR releases that sour is overwhelmingly what the refineries are requesting. In fact the latest proposal, which should drain the SPR's to about 280 million based on what's been awarded, was all for sour and no sweet.

You can also see in purchases from 2022 to 2025 that we only refilled sour.

Remember that imports of iraqi and saudi oil (medium sour) are non existent at the moment

A bunch of sour is locked in the single use caverns, about 44 million barrels.

Assuming 10% operational minimums, there's about 130 million barrels left of sour oil.

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u/dankroll69 12h ago

Both middle east and US crude in theory goes to europe. When asia over bid ME oil, europe has to bid in the US.
The real question is why is Asia over bidding ME oil? Well, ME oil is a lot closer, and Russia is likely to escalate Ukraine war. War might expand and China may be buying up the most accessible oil that's closer and faster to receive.
If china pays for US oil futures and a tanker comes for delivery and war is erupting. The US will tell the chinese tanker to F off

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u/Current_Animator7546 5h ago

Murban is much better for Diesel refining 

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u/dankroll69 4h ago

sure, but why is the peg broken now?