US Cash Crude-Grades fall against surging futures

NEW YORK, Sept 30 (Reuters) - U.S. cash crude differentials mostly weakened on Wednesday as refiners with poor margins declined to buy cash grades priced against the surging value of oil futures.

Mars sour weakened up to 45 cents a barrel to trade for $3.90 below West Texas Intermediate for November delivery . Light Louisiana Sweet differentials fell as much as 35 cents, to trade for 65 cents a barrel above WTI.

Oil futures surged more than 5 percent to settle at $70.61 a barrel, after U.S. government data showed U.S. gasoline stocks unexpectedly fell sharply last week, raising the prospect of a recovery in fuel demand.

But traders said mostly financial players were buying oil futures Wednesday, in part to hedge against a weakening dollar as the third quarter drew to a close. Physical buyers of crude did not follow suit.

'It was a grade raid,' said one broker.

A cash crude trader said U.S. refineries that buy physical crude showed themselves largely unwilling to pay a sharply higher price for crude grades Wednesday as refining margins remain poor, utilization rates are dropping and product inventories are well above seasonal averages.

'The higher flat price can't support higher grades,' the trader said.

U.S. commercial crude inventories grew in the week through Sept. 25 by 2.8 million barrels, the Energy Information Administration said. Analysts polled by Reuters had expected a 600,000 barrel build.

November U.S. oil futures traded at a wider discount, of 34 cents a barrel, to December barrels late Wednesday, versus a 28 cent a barrel discount late Tuesday. U.S. benchmark crude traded at a $1.42 a barrel premium to Europe's Brent, versus a $1.38 a barrel premium Tuesday.

Poseidon sour traded for -$3.80, down 35 cents from Tuesday. West Texas Sour traded even at $2.50 a barrel below WTI.

West Texas Intermediate at Midland traded for as little as 34 cents a barrel below WTI, down one cent from Tuesday.

Bonito sour exchanged hands for $1.20 a barrel below WTI. Its last publicly disclosed trade was at minus $1.85 on Sept. 23.

Thunder Horse traded for minus $1.85, versus minus $2.75 on Sept 25. Heavy Louisiana Sweet was down 20 cents to trade for 5 cents below WTI, versus a previous trade on Monday.

Alaska North Slope crude for November delivery last traded publicly on Sept. 16 for 90 cents a barrel below WTI.

See for Reuters' generic refining margins

See for the WTI front/second month spread

See for front month WTI/Brent futures spread

See for Reuters' assessment of Dated Brent

See for Reuters assessed tanker rates

See for assessed domestic crude differentials

See for outright U.S. cash crude prices

See for a list of U.S. refinery outages

See for U.S. EIA inventory reports and forecasts

See for recent cash crude deals --------------------------------------------------------------

(Reporting by Joshua Schneyer; Editing by Marguerita Choy)

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