Growing U.S. Oil Exports Put Lasting Pressure on Prices

• Cargo-tracking data from Kpler and Vortexa has suggested U.S. crude oil exports hit a record of nearly 6 million barrels daily last week.
• Despite the substantial discrepancy between export estimates, the fact remains that the U.S. is now a major exporter.
• Bloomberg: Producers are looking to get rid of as many barrels as they can as the end of the year and tax season approaches. 

Until 2015, U.S. crude oil producers were prohibited from exporting oil without a special license. In 2015, this changed. Since then, the U.S. has become a top-five exporter.

This has been positive for supply security and consumers by keeping a lid on prices. It has not, however, been positive for OPEC, especially recently, as the cartel struggles to reverse the latest price decline.

What's more, U.S. exports continue to grow, expected to have hit yet another record last week. And WTI just fell below $70 per barrel on Thursday, meaning U.S. oil will remain attractive for importers in the observable future. And now there's talk about an actual oil glut.

Cargo-tracking data from Kpler and Vortexa has suggested U.S. crude oil exports hit a record of nearly 6 million barrels daily last week. The two put the export rate at 5.7 million bpd. Per a Bloomberg report, Macquarie data goes even higher, seeing U.S. oil exports at 5.9 million bpd.

Neither of these figures was confirmed by the Energy Information Administration in its latest weekly report, which put crude oil exports from the U.S. at 4.3 million bpd for the week to December 1, down from 4.75 million bpd a week earlier. The four-week average export rate, according to the EIA, stood at 4.69 million bpd. Related: Saudis Ask U.S. for Restraint As Houthis Direct Missiles At Israel

Despite the substantial discrepancy between export estimates, the fact remains that the U.S. is now a major exporter. And reports of rising exports have added fuel to emerging worries about a potential oversupply, even as OPEC prepares to remove even more oil from the market.

Bloomberg noted in its report that the increase in exports has resulted from record-breaking production, which surprised many industry observers amid drillers' new focus on capital discipline and returning cash to shareholders. Somehow, however, they managed to ramp up production despite these.

The outlet also noted that there is now talk of oversupply well into 2024. That might come as a surprise to commodity analysts who seem to expect higher oil prices next year. Goldman Sachs, for instance, said in late November it expected Brent crude to range between $70 and $100, noting that "the price of oil in 2024 will depend heavily on OPEC" and non-OPEC producers outside the U.S.

It's strange that Goldman has missed the new shale boom and the record exports. ING has also focused on OPEC in its commodities outlook for 2024, highlighting the cartel's central role in oil price formation next year. In fact, ING forecast a modest deficit on oil markets in the first half of 2024.

Indeed, Bloomberg points out that the estimated surge of U.S. oil shipments abroad in the last week of November could be seasonal. Producers are looking to get rid of as many barrels as they can as the end of the year and tax season approaches. The effect on prices remains the same, however, whatever the motivation behind the higher shipments—if the cargo trackers are right and not the EIA.

In addition to the bearish news from cargo tracking service providers, Saudi Arabia reduced its oil prices for Asian buyers for January. While it did not reduce them as much as expected, the market read the reduction as a sign of despair—even as Bloomberg reported that disappointed buyers were looking for cheaper alternatives.

Everything seems to point downwards for oil right now as traders focus on demand rather than supply, reducing the effect of OPEC+ cuts and Middle East escalation on the benchmarks. That's good for oil buyers who may decide to order even more cheap U.S. crude—while it's still cheap. With the events in the Middle East being what they are and now reports of Venezuela preparing to take a significant bite out of Guyana, the next price surge may be around the corner.

By Irina Slav for Oilprice.com

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