Heavy crude oil prices on the U.S. Gulf Coast are rising, indicating a tight supply that could push up gasoline prices.
Gulf Coast refineries, significant in the U.S., process medium and heavy crudes, usually cheaper due to higher processing costs.
Factors influencing prices:
Price increases are attributed to declining Mexican exports, potential sanctions on Venezuelan crude, the launch of Canada's Trans Mountain pipeline, and OPEC+ production cuts, according to Reuters.
The price gap between heavy and light Louisiana Sweet crude has narrowed, highlighting the supply tightness.
Impact on gasoline prices:
Rising heavy oil prices are likely to elevate gasoline prices during the U.S. summer driving season, contributing to inflation concerns.
The average retail price of gasoline has already seen an increase, with further hikes anticipated.
Regional supply dynamics:
Canadian crude prices in Houston are up, with the Trans Mountain pipeline expected to shift more oil to the Pacific Coast, impacting supply.
Mexico's reduction in Maya crude exports and potential U.S. sanctions on Venezuelan crude further strain Gulf Coast refinery supplies.
OPEC+'s extended production restrictions, despite some members exceeding quotas, contribute to supply tightness.
Market Implications:
These developments reflect a complex interplay of regional and global factors affecting heavy crude availability and pricing, with significant implications for the oil market and broader economy.
What is the difference between light and heavy crude oil?
Oil, particularly high-volume crude oil once extracted from the earth, whether from land or sea, is categorized primarily based on its physical characteristics: density and sulfur content. These crucial factors determine the oil's grade and quality and influence how it's refined into various products.
Density (API Gravity):
Light Crude Oil: This oil has a high proportion of light hydrocarbon fractions and flows freely at room temperature. It has a low density, high API gravity, and typically yields a higher percentage of products like gasoline and diesel fuel during the refining process.
Medium Crude Oil: This type of oil is more viscous than light crude and has a moderate API gravity. It yields a reasonable amount of light and middle distillates upon refining.
Heavy Crude Oil: Dense and viscous with a low API gravity, heavy crude oil is more difficult to pump and refine, and it usually results in a larger proportion of heavy products like fuel oil and asphalt.
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