Will U.S. Crude Oil Exports Smash Records Again This Year?

Crude oil and refined petroleum product exports from the United States hit a record high last year, turning the country into a net exporter. This year, as more economies are returning to growth, there's space for further growth. However, there is also increased competition.

According to data from the Energy Information Administration, the U.S. exported 8.51 million barrels of crude oil and oil and gas products in 2020, versus imports of 7.86 million barrels. Exports of crude oil alone stood at 3.18 million bpd, which is less than half of what Saudi Arabia exported at the beginning of this year but still a substantial amount of crude. Imports of crude were higher, leaving the U.S. a net importer of crude, at 5.88 million bpd.

Even so, U.S. oil producers sold crude to a lot of countries, mainly in Asia. Asia is a natural market for the light, sweet grades that dominate U.S. output. Led by China, Asia was the first region to start recovering from the pandemic, which helped exports. The trade deal between the Trump administration and the Chinese government also helped as it obliged China to buy certain amounts of crude, which in 2020 came in at an average of 482,000 bpd, according to Paul Wightman from CME Group.

Europe was the other large oil client of the United States, with the UK, France, Germany, and the Netherlands taking in a combined 719,000 bpd of U.S. crude last year as production of local light grades declined. Related: Asian LNG Buyers Are Preparing For A Harsh Winter

With lockdowns essentially over and vaccinations on the rise, even in Europe, albeit belatedly, the stage looks set for another record year for U.S. exports. Yet, it might not materialize. For one thing, OPEC+ is beginning to boost production. For another, the change of guard at the White House did nothing to improve relations with China. Finally, Iran is boosting output, planning to bring more than 2 million bpd into export markets.

OPEC+ last week agreed to continue adding barrels to its total production, signaling its belief that global demand for crude oil was on a stable improvement trajectory. By July, the extended cartel plans to add some 2 million bpd to its output. That would be more barrels going to Asia-a key market not just for the United States but for OPEC and Russia, too-and to Europe as well.

In geopolitics, President Biden has made it clear China is a rival and a threat rather than a potential partner, which is highly unlikely to improve bilateral relations already soured under Trump. This will not necessarily have a direct and dramatic bearing on Chinese refiners' purchases of crude oil, but it might as it did before during the trade war.

Yet, the biggest challenge for U.S. exports this year will not be geopolitics but competition. Interestingly enough, much of this additional competition depends on U.S. political decisions. The challenge is called Iran. Early this year, soon after Biden came into office, Tehran said it was boosting crude oil production in anticipation of the lifting of U.S. sanctions. Meanwhile, it also continued selling a lot of oil to China. Washington warned sanctions were still in place, but this didn't change anything. Now, if U.S.-Iranian nuclear deal negotiations end well, Iran will be officially allowed to resume exporting crude, and this crude will be cheaper than U.S. crude for a variety of reasons, including proximity and politics. If not, Iran will have to continue exporting oil in limited volumes. Whether President Biden would be willing to secure U.S. oil exports by keeping Iranian sanctions in place is not a bet many would make.

Last year was a record one for U.S. oil exporters. This year may be very different.

By Irina Slav for Oilprice.com

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