OREANDA-NEWS. August Mars traded at an average discount to Light Louisiana Sweet (LLS) of $4.42/bl, after narrowing to as tight as about $2/bl at the beginning of May. That's the narrowest spread between the two grades since June 2012.

Second-quarter deliveries of Mars averaged about $3.10/b under LLS each month for April, May and June when expectations of reduced supply because of a planned turnaround at Shell's Mars production platform helped to firm Mars relative to LLS. But spot trade volumes and production for Mars both rose during that time. Last year, second-quarter deliveries of Mars averaged about $4.50/bl under LLS.

Transacted spot Mars volumes were at their highest to date this year during the August and May trade months at 323,000 b/d and 318,000 b/d respectively. Average spot trade volumes for July and August deliveries are nearly 300,000 b/d. Second-quarter Mars trade month volumes averaged 284,000 b/d, up from a monthly average of just under 220,000 b/d in the first quarter.

Total Mars pipeline deliveries were about 371,000 b/d during May, according to Louisiana state data, rising from an average of 318,000 b/d in the first quarter. Deliveries on the Mars pipeline just to the Louisiana Offshore Oil Port's (LOOP) facility in Clovelly, Louisiana, rose to 345,000 b/d in May, from about 280,000 b/d in the first quarter.

In June, prompt medium sour crude supply became available unexpectedly as well, which may have helped push Mars' discount to more than $4/bl against LLS. Additionally, in May LOOP began deliveries of LOOP Sour crude from storage after setting aside storage capacity for a combination of US medium oil streams Poseidon and Mars, as well as Arab Medium, Basrah Light and Kuwaiti crude. LOOP Sour crude typically trades at a discount to Mars.

In the second half of this year, the Mars-LLS spread will likely remain wide.

Although a generally lower price environment may reduce Eagle Ford production, which has become a major blending component into LLS since the shale revolution, Texas waterborne deliveries of the light crude to Louisiana will likely remain fairly steady and continue to be more economical than the light west African imports that the region had depended on in the past.

Medium sours will be pressured somewhat with Mars production likely to rise as Shell's Mars B continues to ramp up production and Chevron's 170,000 b/d capacity Jack-St. Malo development puts oil into the Mars stream via the Amberjack pipeline. Additionally, Anadarko's 80,000 b/d Lucius project has been adding 28-29°API crude into the Bonito or Poseidon crude streams since January.