In a pivotal geopolitical shift, the United States will soon export more oil and liquids than Saudi Arabia. This remarkable turnaround is made possible by the continued rise in oil production from US shale plays and the increased oil export capacity from the Gulf Coast.
The U.S. has for decades relied on large-scale imports to satisfy its thirst for oil, but this is about to change. The Energy Information Administration (EIA) reported last week that the United States exported more crude and petroleum products than it imported. Granted, the EIA followed up with a report this week that U.S. crude oil stocks had risen by 7.1 million barrels in a week, driven by a renewed appetite among U.S. refineries for imported heavy crude oil. However, for the rest of the year, U.S. exports will grow fast with increasingly attractive price spreads, while U.S. demand for imported heavy oil should again diminish.
“The oil market is overly preoccupied with short-term US crude stocks, but the big picture tells a new story. Increasingly profitable shale production and a robust global appetite for light oil and gasoline is poised to bring the US to a position of oil dominance in the next few years,” said Rystad Energy senior partner Per Magnus Nysveen.
“The political and economic impact of this shift in global trade has already been dramatic, and will be even more pivotal within the next five years. The US trade deficit will evaporate and its foreign debt will be paid quickly thanks to the swift rise of American oil and gas net exports. The tanker shipping industry will see the boom of the millennium, as the excess fossil fuels from America will find plenty of eager buyers in fast-growing Asia. Related: Goldman: OPEC To Clear Supply Glut By April
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Several important milestones are being reached these days. Since September 2018, Canada has been piping enough crude oil across the border to balance the US trade deficit in oil and petroleum products. US crude exports stood at 3.6 million barrels per day (bpd) one week ago, which neatly offsets the 3.5 million bpd of seaborne crude oil imports. At the same time, new pipelines are now bringing more oil to Texas and Louisiana’s expanding export hubs. Related: Oil Majors Are Taking Over The Permian
“This means the US is destined soon to outpace Saudi Arabia when it comes to gross exports of oil and petroleum products,” Nysveen said.
The kingdom currently exports some 7 million bpd of crude oil plus about 2 million bpd of NGLs and petroleum products, compared with the US now exporting approximately 3 million bpd of crude oil and 5 million barrels of NGLs and petroleum products.
Rystad Energy forecasts that US oil production, which increased by about 2 million bpd last year, will grow by close to another 1 million bpd in 2019, despite the fact that independent operators are cutting capital spending.
“This year’s lowered pace of oilfield activity provides support for global oil balances and crude oil prices. And regardless of the reduced investments being made in the first quarter, we will still see significant production growth in the US towards year-end,” Nysveen remarked.
Equally important for oil markets is the incredibly quick expansion of infrastructure across Texas to transport and export Permian crude, and the expansion of refineries’ distillation capacity for light crudes.
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The hype by Rystad Energy about the United States overtaking Saudi Arabia soon in oil exports like its previous hype of US oil production overtaking the combined oil production of Saudi Arabia and Russia by 2025 is based on faulty assumptions and a ludicrous distortion of facts.
According to figures by the EIA, US oil production and consumption in 2018 amounted to 10.9 million barrels a day (mbd) and 20.5 mbd respectively. This means that the US had net imports of foreign oil amounting 9.6 mbd. Therefore, the claim by the EIA that the United States exported more crude and petroleum products than it imported is untrue.
Rystad Energy senior partner Per Magnus Nysveen whose claims were based on faulty assumptions then proceeds to treat his assumptions as facts and starts to tell us how US trade deficit will evaporate and how its foreign debt will be paid quickly thanks to the swift rise of American oil and gas net exports concluding that “this means the US is destined soon to outpace Saudi Arabia when it comes to gross exports of oil and petroleum products,”. In other words, he is piling hype upon hype.
Furthermore, the claim by Rustad Energy that US oil production increased by about 2 mbd in 2018 is false. US production only increased by 1.54 mbd in 2018 from 9.36 mbd in 2017 to 10.9 mbd last year if we are to believe EIA’s own figures.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
My takeaway is that the USA is approaching a point in which it's oil imports will be nearer the amount of total LIQUIDS exported. So looking at raw numbers it will appear to be in balance. However there is not discussion of the relative VALUE or crude oil vs NGL. And how this would magically bring the trade balance in line. What hyperbole!
I find myself wondering what is the purpose of such spin, and who is behind it. Who is pushing the pusher? General pump up for shale industry? Specific retort to articles dropping on the same day about the US trade deficit never being greater? Love to know, but perhaps it's enough to call out the subterfuge as we see it. Regards, DD