OIL: Weak Chinese Demand and TMX Competition Pressure Mars Crude: Platts

Weaker demand from China has been putting pressure on physical spot prices for USGC heavy sours, especially Mars crude, Platts said in its Oil Markets Podcast.

• Platts said that weak demand had pushed Mars to hit a near year low in July and was trading in the negative $2.40/b range. 
• Chinese refineries have sharply cut their crude processing rates in response to weak demand.
• Platts added that the economics of exporting to China have worsened, with the arbitrage window largely closed since May.
• However, as China steps back, the gap may be filled by the likes of India and South Korea as lower prices bring them in as active buyers.
• Gulf Coast heavy sours could also face additional pressure from the expanded Trans Mountain pipeline, with Asian buyers opting to take cheaper Canadian heavy barrels from the Pacific Coast.
• The shipping distance from Western Canada is also shorter, giving the barrels an advantage over those from the Gulf.