By Jacob Gronholt-Pedersen
SINGAPORE, Jan 18 (Reuters) - An end to sanctions on Iran
has driven global crude futures to 12-year lows and brought
sub-$20-a-barrel 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-to-refine grades looks set to intensify.
This could act as an additional weight on benchmarks Brent
LCOc1 and West Texas Intermediate (WTI) CLc1 futures, which
have slumped roughly 20 percent since the start of the year to
prices under $29 a barrel. O/R
"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
SHRWCSMc2 - 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 like
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 sales prices from the country to unprecedented lows.
In early-December, Mexico's state-owned Pemex PEMX.UL
offered Asian buyers a discount on Maya crude for January
lifting of about $12 a barrel to the underlying price marker, an
average of Oman and Dubai prices.
But with oil prices falling more than $10 since then, that
discount effectively cut the price in half to about $12.50 a
barrel on Monday. MYA-OSP-A
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Sub-$20 oil sellers club http://reut.rs/1OA440H
Graphic of key physical & futures oil prices: http://tmsnrt.rs/1OrncQG
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