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How OPEC Has Filled America’s Russian Oil Void

A little over a year ago, the United States government banned the importation of Russian crude, petroleum, oils and products of their distillation, LNG coal and coal products. Whereas the United States was nowhere near as dependent on Russian energy commodities compared to the average European nation, it still imported a significant amount of crude, petroleum and unfinished oils, making the task of replacing those supplies in short notice a challenge for energy companies. Indeed,  Russia's U.S. footprint had been steadily growing in the years prior to the invasion.

Luckily, producers and refiners in the Middle East and Latin America have been able to step in and fill the void left by the removal of Russian oil and gas.

Russian Energy Exports To The U.S.

The biggest energy commodity that the U.S. imported from Russia by volume in 2022 was petroleum, with imports increasing for three years straight to a record 673,000 barrels per day.

The second biggest import commodity was unfinished oils. Rather than buying finished products such as gasoline or jet fuel from Russia, the U.S. primarily imported unfinished oils, essentially intermediate feedstocks used by refineries and components used to make other liquids. Unfinished oils accounted for nearly 75% of the 474,000 b/d in products the U.S. imported from Russia in 2021, a drop from ~82% in the previous year.

Related: Texas Adds HSBC To Blacklist Of Banks Boycotting Oil And Gas

Interestingly, the U.S. only imported limited amounts of Russian crude prior to the ban: in 2021, the country bought 80,000 b/d of Russian crude, a considerable drop from the 2010 peak at 269,000 b/d. Valero Energy Corp. (NYSE:VLO), Marathon Petroleum Corp. (NYSE:MPC), Phillips 66 (NYSE:PSX), PBF Energy Inc. (NYSE:PBF) and Delta Airlines' Monroe Energy subsidiary were the main importers of Russian crude.

The U.S. used to buy Russian oil in part to feed refineries that require crude with a higher sulfur content to make fuel at top capacities. Many U.S. refineries were also designed many years ago to use heavier grades of crude when domestic supplies were lower.

Source: Energy Intelligence

Filling the Russian Oil Void

OPEC has played a big part in filling the void left after the ban. U.S. crude imports from the cartel grew by 101,000 b/d from 2021 to 2022, with flows from Saudi Arabia and Iraq increasing by 100,000 b/d and 92,000 b/d, respectively, as noted by Energy Intelligence

Several Latin American crude producers have also been able to gain market share in the U.S. after Russia's exit. Brazil, Guyana, Mexico, Colombia and Argentina have all ramped up supplies to the U.S. Interestingly, some U.S. refiners have been able to secure supplies from producers with whom they previously had no business ties. For instance, last year, Monroe Energy imported crude from Argentina for the first time ever after the ban went into effect.

It also helps that U.S. downstream capacity has been on a decline over the years with the latest refinery closures taking offline some 1 million b/d in throughput capacity since mid-2019.

OPEC member states have also played a crucial role in replacing Russian oil products. The country's shipments of unfinished oils from OPEC increased by 136,000 b/d to 190,000 b/d from 2021 to 2022, with Saudi Arabia and Iraq again being the top exporters. Several non-OPEC members have also been selling significantly more unfinished oil to the U.S., with Canada's exports of unfinished oil increasing by 15,000 b/d while Brazil's exports are up by 12,000 b/d. Overall, the U.S. exported 517,000 b/d of unfinished oil products in 2022, a decrease of 42,000 b/d from the previous year.

U.S. Oil Exports Soar 

It's interesting to note that exports of U.S. oil products also soared last year after the country became the energy supplier of last resort following Russia's invasion of Ukraine, with total petroleum shipments exceeding 11 million barrels per day. Particularly, appetite for U.S. diesel remained elevated in Europe and Latin America. The jump in exports across the board played a part in draining inventories in the U.S. and elevating prices. 

Demand for U.S. oil remains strong in the current year.

U.S. oil exports to Europe hit a record high of 2.1 million b/d in March thanks to oil prices falling to multi-year lows. Export demand has, however, helped goose prices of top U.S. crude grades. For instance, the average price for WTI Midland has gained nearly 50% compared to the previous quarter while WTI at East Houston has gained about 30%.

Kpler analyst Matt Smith has told Reuters that U.S. exports will remain robust  in the coming months as long as the Brent-WTI spread remains wide.

By Alex Kimani for Oilprice.com

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Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.  More