OREANDA-NEWS.  US independent refiner Valero increased light crude processing to undisclosed "record volumes" this month as export cuts slashed sour crude's competitiveness, the company said today.

Higher-sulfur, or sour, crude typically requires a discount accounting for the more complex equipment operated needed by the few refiners that process such crude. But supply of the feedstock has fallen this year as Opec and non-Opec members cut exports to try to drain global crude inventories.

Export limits set by Opec and non-Opec members had narrowed discounts for lower quality crude, vice president of supply Gary Simmons told the JP Morgan Energy Equity Investor conference in New York. Valero "started shoving some of the heavy barrels and some of the medium sour barrels back into the market" in June, he said.

"I think you will see a little bit of improvement in the quality differentials as we move forward, but you will not have significant increase until the Opec cuts wind down," Simmons said.

Valero set its company-record sweet crude processing volume of 1.3mn b/d — more than half of the crude its refineries processed — in the third quarter of 2015. Mars, a benchmark medium sour crude, averaged a $4.87/bl discount to Light Louisiana Sweet (LLS) crude at the time. The Argus Sour Crude Index (ASCI) averaged a $4.90/bl discount to Brent during the same period.

Mars has averaged just a $3.25/bl discount to LLS in the second quarter so far. ASCI averaged a $2.50/bl discount to Brent so far this quarter — 25pc lower than the same quarter last year and 44pc lower than the five-year average for the quarter.

Valero investments across the US Gulf coast allowed the company to enjoy discounts from more difficult medium and heavy sour barrels. Imports from Opec members Iraq, Kuwait, Nigeria, Saudi Arabia and Venezuela averaged 80pc of the company's imports in 2016, according to Energy Information Administration data.