U.S. Crude Exports Benefit from Perfect Storm of Factors

Recent crude exports from the U.S. have represented a doubling of flows out of the country in just a couple of months. While a sizeable increase was expected, it is not clear that exports can be sustained at 2.0 million b/d, says ESAI Energy in its recent 2-year Global Crude Oil Outlook. Crude exports in early September were hemmed in by the hurricanes, so some of this is pent up supply leaving domestic storage to go to offshore storage. There are refiners “trying” US crude and some quality swapping. Rising pipeline capacity has brought more crude to the USGC, and wide Brent-WTI spreads have covered transportation costs to foreign markets. More recently, lower Iranian condensate exports have provided an opening for US exports to Asia. From the perspective of U.S. supply, the volume of crude potentially “available” for export will clearly grow in the next two years, and periodically exceed 2.0 million b/d. From the perspective of global demand, however, a sustainable flow is likely to be closer to 1.5 than 2.0 million b/d.

Some target countries for U.S. exports have splitting capacity that is well-suited for the higher API, high naphtha content shale. Indeed, there is about 950,000 b/d of splitter throughput in countries which do not have significant domestic condensate production. Most of the condensate they run is imported. That volume will rise to 1.1 million b/d by the end of 2019. Beyond splitter use, there are a number of countries, which already import extra-light sweet crude oil from other regions like the North Sea, West Africa, Kazakhstan or Saudi Arabia.

“Putting something up for sale and actually selling it, are two different things, comments ESAI Energy Principal, Sarah Emerson. “U.S. crude exports will be impressive, but they will be competing with other sources who also export condensate and light sweet crude to many of the same customers.”

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United StatesESAI EnergyCrude oilexportsCrude ExportsBrent-WTI

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