Oil set for sweet-sour rebalancing

The unusual premiums sour grades have enjoyed over sweet may be coming to an end

An imbalance in sweet-sour crude supply has been a key feature of the oil market since 2017. But fundamentals and price spreads suggest the historically elevated value sour grades have held relative to sweet may finally get eroded. The altered sweet-sour dynamic over the last three years or more has been driven not only by Opec+ cuts and US sanctions on Iran and Venezuela, reducing the availability of sour grades, but also the growth of US shale, boosting supply of sweeter barrels—and transforming the quality of the marginal barrel entering the market. This imbalance has impacted trade flows, with growing US exports to Europe and Asia. And it has also disrupted price differentials, including