• 1 day PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 1 day Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 1 day Syrian Rebels Relinquish Control Of Major Gas Field
  • 1 day Schlumberger Warns Of Moderating Investment In North America
  • 1 day Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 1 day Energy Regulators Look To Guard Grid From Cyberattacks
  • 1 day Mexico Says OPEC Has Not Approached It For Deal Extension
  • 1 day New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 2 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 2 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 2 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 2 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 2 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 2 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 3 days Russia, Saudis Team Up To Boost Fracking Tech
  • 3 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 4 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 4 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 4 days China To Take 5% Of Rosneft’s Output In New Deal
  • 4 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 4 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 4 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 5 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 5 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 5 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 5 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Alt Text

A New Oil Crisis Is Developing In The Middle East

As Iraqi-Kurds prepare to fight…

Alt Text

Russia And China Continue To Boost Oil Ties

The Russia-China alliance is strengthening…

Alt Text

The New Challenger To Lithium Batteries

The lithium-ion battery is head…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

U.S. Threatens OPEC As Oil Exports Hit Record High

Oil Tanker

U.S. oil exports jumped to a record high in February, rising by a whopping 35 percent from a month earlier. At over 1 million barrels per day (mb/d), the U.S. became a larger exporter than a handful of OPEC members, including Ecuador, Gabon, Libya and Qatar.

The U.S. used to prohibit the export of crude oil, a prohibition that was removed at the end of 2015. Since then, exports have inched up bit by bit. But in the fourth quarter of 2016, exports began to surge, a rapid rise that has extended into this year. In February, the latest month for which data is available, U.S. exports climbed to a record high 31.2 million barrels.

(Click to enlarge)

There are multiple reasons for the sudden uptick in exports. First, of course, is the OPEC production cuts. The reduction of Middle Eastern crude has made U.S. oil more competitive in Asia, as the Dubai benchmark – a price that tracks oil from the Middle East – traded at a premium relative to WTI. The Dubai benchmark has sold at more than $1 per barrel above WTI lately, compared to a more than $2 per barrel discount last year. "A very strong WTI-Dubai spread enabled opening in arbitrage opportunities to Asia at a time when there were lots of turnarounds going on in the U.S. Gulf in February," Dominic Haywood, an analyst for Energy Aspects Ltd. told Bloomberg in an interview. Put another way, the reduction of OPEC supply has made room for the U.S. to make inroads in the Asian market.

As China saw the flows from OPEC countries reduce, it turned to the U.S. for oil in February, buying up more than 8 million barrels from American producers, or almost four times the volume that it purchased in January. The OPEC cuts came at a time when China is importing more oil than ever, and the U.S. appears more than willing to fill that need. Related: China Just Became The No.1 Buyer Of U.S. Crude

(Click to enlarge)

But the high levels of U.S. crude exports probably won’t be permanent, for a few reasons.

First, the spread between Dubai and WTI won’t last forever. U.S. refineries are in the midst of maintenance season, and when more of them come back online and ramp up ahead of summer driving seasons, the flood of oil on the Gulf Coast will be used up domestically rather than exported.

That will lead to lower levels of exports while stepped up purchases from refiners could begin a strong drawdown in the sky-high level of U.S. crude inventories. That, in turn, could provide a bit of a lift to the WTI benchmark, zeroing out any advantage that the U.S. has over Dubai-priced oil.

Moreover, it is not clear that OPEC will extend its production cuts for another six months. Even if it does, OPEC producers are going to return to the market eventually, to great effect. At some point, Saudi Arabia will grow tired of ceding market share to other exporters, and will fight to reclaim customers. Higher U.S. exports “obviously is a challenge for the global market and a renewed threat to OPEC and their designs of keeping prices up," John Kilduff of Again Capital told CNBC. Related: Exxon To Enter The Most Sought After Oil Play In The World

In fact, just this week Saudi Aramco slashed its prices for light oil heading to Asia, a sign that it isn’t willing to hand over Chinese customers to the U.S. shale industry.

Finally, some broader context is needed. The U.S. is still a net-importer of crude by a large margin. The 1 million-barrel-per-day export level is dwarfed by the 7 to 8 mb/d that the U.S. imports. And because consumption is not going down appreciably, a higher level of exports is arguably being replaced by more imports. U.S. imports for the first three months of 2017 averaged 8.17 mb/d, higher than the 7.87 mb/d the U.S. imported for the first three months of last year. So, while the record high level of exports in February is notable, the U.S.’ status as one of the largest importers in the world has not changed in any significant way.

(Click to enlarge)

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Lee James on April 07 2017 said:
    The title of this article seems oriented around "selling newspapers." A country that remains a decided net-importer of crude is not a threat to other crude export countries. And, a lot of our export is for maintaining a match of sweet-sour crude feed stock to what a given refinery is designed to process.
  • Teddy Cakes on April 07 2017 said:
    It doesn't matter how much crude this country is capable of producing, when we allowed Saudi Arabia to take ownership in half the gulf refineries, we guaranteed that we'd be customers of theirs for life. Which I guess is fine, because we're always going to need it.
  • EH on April 09 2017 said:
    Like the Texas bol-weevil song,, just a looking for a home. Along with the miles and miles of other tankers parked at sea with no place to store or unload. Might call it a FLOATING TANK FARM!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News