Refiners on the US Gulf Coast are welcoming the return of Venezuelan heavy crude, even though not all are in any particular rush to buy these barrels. Marathon Petroleum — the world’s largest independent refiner — says there are “better options” than Venezuela to meet its appetite for heavy, sour grades. Others are more bullish: Valero executives say they plan to be big buyers of Venezuelan crude, at rates that may exceed the volumes Valero purchased prior to peak sanctions enforcement against the country late last decade. While their approaches to buying barrels from the Opec member differ, US refiners appear unanimous on one thing — Venezuela’s return will help widen light-heavy and sweet-sour crude differentials on the Gulf Coast, lowering costs across the board and boosting margins for downstream firms with sophisticated kit. Heavy-crude discounts to US benchmark WTI were already increasing prior to the US’ de facto seizure of Venezuela’s oil sector and the announcement of a supply deal following the capture last month of President Nicolas Maduro. Rising Canadian production and incremental offshore supply from the US Gulf, combined with the unwinding of Opec-plus cuts, pushed the heavy discount higher; events in Venezuela have only intensified the movement. Both Canadian benchmark Western Canadian Select and Gulf Coast medium, sour staple Mars are now trading at wider discounts than refiners saw last year, executives said. “Right now, we’re seeing heavy Canadian in the Gulf Coast trading at about $11 to $11.50 under Brent. That’s about $4 cheaper than our Q4 average,” while Mars’ discount to Brent is around $1 per barrel wider than it was last quarter, Valero Vice President Randy Hawkins said during a recent earnings call. As more Venezuelan crude arrives, the spreads will “widen out even a bit more because many of these Venezuelan barrels have not reached the market yet and have not been run yet,” said Marathon Chief Commercial Officer Rick Hessling.
