US Cash Crude-Grades mixed as Strait of Hormuz fears worsen, WTI/Brent spread narrows

- Grades were mixed on Tuesday as optimism over a potential U.S.-Iran deal over the weekend was offset by renewed concerns following U.S. military strikes in Iran, and the discount for U.S. crude futures versus Brent narrowed to its lowest in more than a month.

Mars, the benchmark U.S. sour crude, fell more than $4 to settle at a $3.00-per-barrel discount to West Texas Intermediate (WTI), its lowest level since January 2023. Other grades, such as WTI Midland and Light Louisiana Sweet, showed signs of firming on export demand.

Ship-tracking data showed three liquefied natural gas tankers joining a handful of supertankers leaving the Gulf this month via a transit route that Iran has ordered ships to use.

Last week, three Very Large Crude Carriers (VLCCs) made their way to China and South Korea with 6 million barrels of crude.

And on Tuesday, a cargo of crude oil from the U.S. Strategic Petroleum Reserve was heading to the Philippines, the first shipment of U.S. emergency reserve oil to Asia since November 2022, tracking data showed.

This comes as the spread between Brent and WTI narrowed to last trade at $5.97, its smallest discount since April 10. A spread above $4 typically encourages exports.

On the demand side, U.S. oil refiners are expected to have about 178,000 barrels per day of capacity offline in the week ending May 29, increasing available refining capacity by 50,000 bpd from the previous week, research company IIR Energy said on Monday. Offline capacity is expected to fall to 132,000 bpd in the week ending June 5, IIR said.

  • Light Louisiana Sweet for June delivery firmed to a midpoint of a 93-cent premium and was seen bid and offered between a discount of 20 cents​​ and $2.05 a barrel premium to U.S. crude futures CLc1. ​

  • Mars Sour fell $4.03 to a midpoint of a $3.00 discount and was seen bid and offered between a $3.20 and $2.80 a barrel discount to U.S. crude futures CLc1.

  • WTI Midland firmed 80 cents to a midpoint of a $1.10 premium and was seen bid and offered between a 90-cent and $1.30 a barrel premium to U.S. crude futures CLc1.

  • West Texas Sour firmed $2.40 to a midpoint of a $2.40 discount and was seen bid and offered between a $2.60 and $2.20 a barrel discount to U.S. crude futures CLc1. ​

  • WTI at East Houston, also known as MEH, traded between a $1.30 and $1.60 a barrel premium to U.S. crude futures CLc1.

  • ICE Brent July futures LCOc1 rose $3.44 to settle at $99.58 a barrel on Tuesday​.

  • WTI July crude CLc1 futures fell $2.71 to settle at $93.89 a barrel on Tuesday​.

  • The Brent/WTI spread narrowed 97 cents to last trade at minus $5.97, after hitting a high of minus $5.62 and a low of minus $6.63.