As global oil markets shift their attention from U.S. shale oil production back to a resurgent Saudi Arabia and Russia and geopolitical concerns bearing down on oil prices, Citigroup said last Wednesday that the U.S. is poised to surpass Saudi Arabia next year as the world’s largest exporter of crude and oil products.
The U.S. exported a record 8.3 million barrels per day (bpd) last week of crude oil and petroleum products, the government also said Wednesday. Top crude oil exporter Saudi Arabia’s, for its part, exported 9.3 million bpd in January, while Russia exported 7.4 million bpd, the bank added.
However, it should also be noted that the Citi projection is for both crude and finished (refined) petroleum products, not only crude oil. Saudi Arabia remains the world’s largest exporter of crude, though since January amid the OPEC/non-OPEC production cut agreement that figure has fallen. On April 10, the Saudi oil minister said that the kingdom planned to keep its crude oil shipments in May below 7 million bpd for the 12th consecutive month.
Saudi Arabia has also trimmed its oil production more than 100 percent of the output cuts it agreed to under the January 2017 production deal. In March, Saudi crude production was at 9.91 million bpd, below the deal’s output target of 10.058 million bpd.
Russia, however, also part of the global oil protection cut agreement, increased its crude oil production by 0.2 percent to 10.97 million bpd in March, compared to the previous month and an 11-month high. Related: Electric Planes Could Soon Be A Reality
Though Citi has projected that the U.S. could bypass Saudi Arabia in the export of crude and petroleum products, U.S. crude oil exports have been relatively low compared to other major oil producers since the Obama Administration lifted the ban of American crude oil exports in 2015.
Nonetheless, U.S. crude exports are poised for an upward trajectory. On Wednesday, the U.S. Energy Information Administration said the U.S. crude exports last week increased by 582,000 bpd to 2.331 bpd, an all-time high.
Profiting from arbitrage
The reason for the spike in exports also comes from the price divergence (arbitrage) between London-traded, global benchmark Brent crude and NYMEX, U.S.-benchmark, West Texas Intermediate (WTI) crude prices. As the spread between the two benchmarks widens, WTI trades at a significant cost advantage against Brent as well as other crude benchmarks. The WTI discount is a boon for refineries, particularly in Asia, that need the light sweet crude which yields higher priced refined petroleum products.
U.S. crude is also competing for market share in China against traditional exporters Saudi Arabia, Russia and Iran. China for its part seems to be pivoting away from Saudi oil as the kingdom continues to increase its official selling price (OSP) for Arab Light crude. Related: Oil Prices Slip On Large Crude Inventory Build
On Tuesday, Unipec, the trading arm of state-run Sinopec Group, said that it plans to continue to cut their Saudi Arabian crude oil purchases for June and July loadings, after slashing May shipments by 40 percent. Unipec executives said that Arab Light crude is no longer competitive against other crude blends. Unipec executives have said previously that such prices increases were “unreasonable.” Sinopec is Asia’s largest refiner.
Saudi Aramco is expected to raise its OSPs by at least 50 cents a barrel for June cargoes to track increases in benchmark Middle East crude Dubai this month, Reuters said, citing two traders that participate in the market.
Russia overtook Saudi Arabia as China’s top crude oil supplier in 2017. Saudi Arabia remained the second largest supplier to China in Q1 this year, although its exports were down 5.7 percent from a year ago.
U.S. crude is also finding more buyers in Europe due to the Brent/WTI arbitrage. Market sources have estimated U.S. exports to Europe would average 800,000 bpd between mid-May and mid-June, including 25 million barrels in May overall. One source, according to a report in Hellenic Shipping News, said that of the 25 million barrels expected to land in May, 15 million barrels had already been placed with end-users.
“We are seeing record arrivals from the US to Europe,” a trader said, adding that while all sorts of grades were crossing the Atlantic, WTI Midland represented the largest portion.
By Tim Daiss for Oilprice.com
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The U.S. exports light oil but imports heavy oil instead. It's a wash. However, Saudi Arabia is a *NET* exporter.
The discussion of top exporter is *cherry picked truth* and not very meaningful when in fact the U.S. is still a *NET* importer!
to enable the u.s. to become the world's "top" oil exporter it must import more than half of it's daily demand requirement. to assert the u.s. is a "top" exporter is disingenuous, at best. were the nation's import crude oil supply to be curtailed, the u.s. couldn't produce enough oil for it's own demand, much less export oil based commodities to foreign nations.
Last 6 week avg per EIA: product and crude imports exceeded net exports by 3.448 Million Brls/day
Let's get it done.
The whole system is rigged!
The rest of the world can pay the profits for Big Oil.
If it's a lack of refining capacity, then build a few!
The exports should be stopped to keep our economy moving upward instead of becoming stagnated by Congress opening the oil valve to international countries.
There are a hundred more reasons that this is a stupid idea. I think Valerie Jarrett and John Kerry
negotiated this insanity.
First, what the EIA calls "Crude oil" is actually Crude + Condensate (C+C). Condensate is a very light oil, similar to gasoline, with almost not distillate content (diesel, jet fuel, etc.).
Based on the most recent four week running average EIA data, US refineries had C+C inputs of 16.8 million bpd. On a gross basis, we imported 8.4 million barrels of C+C, actually mostly crude oil in this case. So, on a gross basis, US refineries are dependent on foreign oil for half of the C+C inputs into US refineries.
If we take into account gross C+C exports (probably mostly very light crude and condensate), net C+C imports were 6.5 million bpd (again, mostly actual crude oil).
So, regardless of whether we look at it on a net or gross basis, US refineries are dependent on foreign sources of crude oil for about 40% to 50% of the C+C inputs into US refineries.
In my opinion, crude oil prices are going up because actual global crude oil production has been approximately flat to down since 2005, and because Global Net Exports of oil (GNE, total petroleum liquids in this case) have been down since 2005, with the Chindia region consuming an increasing share of GNE.
I estimate that the volume of GNE available to importers other than China & India fell from 40 million bpd in 2005 to 33 million bpd in 2016.
Less oil in the world produced means higher prices, got nothing to do with How much America produces.
Oh why no new refinerys? Ask Obama and the Democrats they put so many regulations in place nobody can build. It's going to take Trump time to get rid of the stupid Obama regulations.