Worried about sub-$20 crude? Some sellers are already there

SOME CARGOES OF HEAVY MEXICAN CRUDE ARE TRADING FOR LESS THAN $13 A BARREL

An end to sanctions on Iran has driven global crude futures to 12year lows and brought sub-$20 (Dh73.46) abarrel oil in sight, although for some producers that is already a painful reality.

This unfortunate group sells some physical crude cargoes at prices that are closer to $10 a barrel, thanks to an abundance of the “sour” grades they produce and a consumer base that favours higher-quality “light” oils from other origins.

Producers of certain crudes from Mexico, Venezuela, Canada and Iraq are bracing for worse to come as Iran — now free of international sanctions — prepares to offload hefty supplies of heavy sour grades onto export markets.

Some cargoes of heavy Mexican crude are trading for less than $13 a barrel, and downside price momentum for hard-torefine grades looks set to intensify. This could act as an additional weight on benchmarks Brent and West Texas Intermediate (WTI) futures, which have slumped roughly 20 per cent since the start of the year to prices under $29 a barrel.

“The drastic fall in outright prices is wreaking havoc on heavy crudes which are typically sold at deep discounts to benchmark crudes,” said analysts at JBC Energy.

In the Canadian town of Hardisty, Alberta, buyers can pick up a barrel of crude known as Western Canadian Select — one of North America’s largest heavy crude oil streams — for less than $15, while producers need a price above $43 to make money.

And while some oil-dependent producing countries such as Venezuela and Russia have seen their economies suffer, many refiners are licking their chops. Some Asian oil importers are soaking up record volumes of Mexican crude in particular, as fixed-dollar discounts to rapidly falling benchmarks have slashed