By Stephanie Kelly

NEW YORK (Reuters] – The market participants reported that a key U.S. sour grade crude oil is being discounted at levels previously unrecorded for two years, as it competes against a flood released by the White House to offset sanctions on Russian oil.

In an effort to curb rising oil prices, Biden’s administration has sold barrels from its U.S. Strategic Petroleum Reserve in order to compensate for global shortages. But, many of the barrels were considered sour or have higher sulfuric contents, making them directly competitive with Mars, an important offshore U.S. oil quality.

Since Russia invaded Ukraine in February, the global oil market is scrambling for supply. This has prompted countries and companies to stay away from Russian energy.

FGE Energy Consulting reports that Washington sold 36.3 million barrels worth of crude oil between April 15 and April 30. FGE stated that those barrels were many of the ones purchased by U.S. oil refiners and would be available for sale between May 15th and June 30.

SPR crude oil deliveries increased Mars Sour’s discount to $6.50 per barrel compared to the U.S. West Texas Intermediate benchmark. Friday’s trading was the lowest level since March 2020, traders stated.

Prices for North American markets are being affected by the flood of sours barrels. For example, Western Canada Select (WCS) is currently trading in Alberta at $20 per barrel less than WTI. This is the largest drop since early 2020.

Matt Smith from Kpler, the lead oil analyst in the Americas for Kpler said that “this should result in higher exports both of Mars crude and Canadian heavy barges out of the U.S. Gulf Coast.”

Smith stated that there hasn’t been an export to Mars since the arrival of a large crude carrier bound for India at early May.