U.S. Heavy Crudes Surge on Extended Saudi Cuts, Venezuela Woes

(Bloomberg) -- American refiners in need of heavy crude oil won’t be getting a break anytime soon, as supplies keep getting tighter.

Heavy, higher-sulfur crude on the U.S. Gulf Coast surged in value Monday as Saudi Arabia was said to extend its deeper production cuts through April. Meanwhile, a power outage that darkened most of Venezuela through the weekend curtailed output from the nation’s already-fragile oil operations. Venezuela’s production may have fallen by half temporarily to about 500,000 barrels a day, consultant Energy Aspects Ltd. said in a note to clients.

The latest events further constrained a heavy crude market already feeling the pinch from supply cuts by OPEC and its allies, Canadian curtailments, and reduced exports from Venezuela and Iran because of U.S.-led sanctions. Refiners that have spent billions of dollars upgrading their plants to process the lowest-quality grades of crude are turning to other Latin American nations and Canada for the kinds of oil they need most.

U.S. Heavy Crudes Surge on Extended Saudi Cuts, Venezuela Woes

High-sulfur Mars Blend crude was just 40 cents a barrel below Light Louisiana Sweet, the narrowest gap since 2011. Western Canadian Select, a heavy, high-sulfur oil from Alberta, was valued at about $3.75 a barrel above U.S. benchmark West Texas Intermediate crude for delivery in April at Nederland, Texas, according to people familiar with the matter. Back in December, it was worth at least $2 a barrel below WTI, two of the people said.

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