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The Biggest Oil Story Of 2017

The Biggest Oil Story Of 2017 thumbnail Oil

There have been plenty of eye-catching stories in the energy industry this year, but one notable development has been the rise of the U.S. as a crude oil exporter.

The ban on crude exports from the U.S. was lifted at the end of 2015, and exports ticked up in the following year, but only modestly. 2017, however, was the year that the floodgates opened.

In the first half of the year, there were several weeks when the U.S. topped 1 million barrels per day (mb/d), but exports averaged about 750,000 bpd between January and June.

(Click to enlarge)

In the third quarter, the export machine really kicked into high gear, and Hurricane Harvey was arguably the spark. It may seem odd at first blush that a disastrous storm that ravaged Texas would be the thing that spurred a rise in U.S. oil exports, but because so many refineries were damaged, a lot of the oil produced in Texas had to go elsewhere.

That surplus of crude and the temporary shortage of refining capacity was visible in the discount for WTI relative to Brent, a price differential that widened to as much as $7 per barrel after the storm, the largest disparity in years. If you are a buyer in say, China, paying $7 less per barrel than elsewhere is pretty appealing, even after factoring in high transport costs. As such, it is no surprise that U.S. oil exports to China surged this year.

U.S. oil exports hit a high at 2.133 mb/d in the last week of October, and have fallen back a bit since. In fact, it would seem to be a struggle for the U.S. to maintain such a high level of shipments. The more oil that is exported, the more likely the discount between WTI and Brent would narrow, which would essentially eat away at the competitiveness of U.S. crude.

Nevertheless, the U.S. has averaged exports of 1.5 mb/d in the fourth quarter, which is very high historically and makes the U.S. a significant player in the global oil market. At that level, the U.S is shipping more oil than 6 of the 14 OPEC members.

Moreover, even as U.S. oil exports may ease a bit next year, there are some forces working in its favor. The WTI discount remains exceptionally large, with front-month prices still trading almost $7 per barrel lower than Brent. That will keep exports high. Argus Media notes that transport costs of very large crude carriers (VLCCs) run at about $3.75 per barrel, which means the differential between WTI and Brent is supportive of U.S. exports.

The discount is helped along by the fact that U.S. shale output is surging, which acts as a drag on WTI. The EIA predicts that the U.S. will average 9.9 mb/d in 2018, an all-time high. OPEC and other analysts expect growth of U.S. shale by about 1 mb/d; the IEA sees slightly less but still robust growth of about 870,000 bpd.

At the same time, the outage at the Forties pipeline directly affected Brent, both in terms of fundamentals (an outage of several hundred thousand barrels per day) and in the way the benchmark is priced (Brent prices are specifically based on oil coming out of the North Sea). Other outages, such as in Libya, have more of an effect on Brent than WTI.

In addition, the longer the discount stays in place, the more likely the U.S. holds onto some customers even after the discount narrows. Argus Media reports that refiners from South Korea, India and Poland are beginning to make purchases of American crude, replacing barrels that typically come from the Middle East. Refiners in these countries recently booked initial cargoes from the U.S. ahead of several more purchases scheduled in subsequent months.

Another reason why exports could remain elevated is that more crude export terminals are set to come online in 2018 and 2019. The Louisiana Offshore Oil Port (LOOP) is making changes to its facility in order to handle VLCCs, which will expand the ports capacity and lower the cost of export. That upgrade is slated to reach completion in early 2018.

U.S. oil exports surged in 2017, and 2018 could see more of the same.

oilprice.com



17 Comments on "The Biggest Oil Story Of 2017"

  1. Anonymous on Mon, 1st Jan 2018 8:12 am 

    Rockman to complain about “ban” rather than “restriction” wording. And talk about products. In 4, 3, 2…

  2. dave thompson on Mon, 1st Jan 2018 8:24 am 

    Exporting oil from the US is still much less than the imports of crude. By my unprofessional estimate for 2017 the US imported about 7 million BBls per day, that is by Google search information.

  3. Anonymous on Mon, 1st Jan 2018 9:48 am 

    Net imports of crude and products is averaging about 4 MM bbls/day. That is down from 12+ in 2005. It is a huge change.

  4. dave thompson on Mon, 1st Jan 2018 11:36 am 

    This is my search ; https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCRIMUS2… Shows much more………….

  5. MASTERMIND on Mon, 1st Jan 2018 12:44 pm 

    Annyomouse

    I scared that stupid idiot Rockman away..He is just a dumb fucking shill..

  6. MASTERMIND on Mon, 1st Jan 2018 12:47 pm 

    The US Shale Business is “not profitable” and can’t fund itself whether oil is at 100 or 50 dollars a barrel
    https://imgur.com/a/t7ulB

    MIT Technology Review: Shale Oil Will Boost U.S. Production, But It Won’t Bring Energy Independence
    https://www.technologyreview.com/s/507446/shale-oil-will-boost-us-production-but-it-wont-bring-energy-independence/

    The world’s largest oil trader Vitol says US oil production will peak in 2018
    https://www.reuters.com/article/us-commodities-summit-vitol/u-s-oil-output-may-be-set-for-last-spike-in-2018-vitol-idUSKBN1CF1MZ?rpc=401&

  7. MASTERMIND on Mon, 1st Jan 2018 6:21 pm 

    This is the biggest oil story of the year

    Inside the new economic science of capitalism’s slow-burn energy collapse (Ahmed, 2017)
    https://medium.com/insurge-intelligence/the-new-economic-science-of-capitalisms-slow-burn-energy-collapse-d07344fab6be

  8. Cloggie on Tue, 2nd Jan 2018 1:11 am 

    Germany closes down yet another nuclear power station (=4000 wind turbines):

    Gundremmingen block A and B

    http://www.spiegel.de/wirtschaft/soziales/atomausstieg-block-b-von-akw-gundremmingen-in-bayern-abgeschaltet-a-1185672.html

    Only 7 nukes remain, including block C Gundremmingen.

  9. Cloggie on Tue, 2nd Jan 2018 1:21 am 

    Red Millimind is pushing this Nafeez Ahmed, who is spearheading the communist takeover of Britain. That other forum red Apneaman (what happened to him and rockman?) always pushes him too. The US is likely to become communist after Trump, when demographics will be such that there are enough non-whites within the country who demand “equal rights” (read: equal income, to be paid for by stupid whitey) and will be able to actually enforce it, all under the fine anti-white leadership of George Soros or Mark Zuckerberg.

    In Sweden you already see this happening as well, where retirement age has recently increased because the state can’t pay for all the handouts after the “refugee” tsunami of 2015. Whitey and his stupid Christian humanitarianism, in reality warfare against the children of the West.

    https://voiceofeurope.com/2017/12/swedish-workers-have-to-work-longer-to-pay-for-migrant-benefits/

    Zuckerberg already flirted with a basic income for all.

    Again, the US $ losing reserve currency status means a loss of GDP of 30-40%, meaning the US falling back to Romania levels. This will push US society to the brink of revolution.

    Mass immigration is the biggest disaster of our time for our societies, not peak oil.

  10. Davy on Tue, 2nd Jan 2018 5:07 am 

    “The US is likely to become communist after Trump”
    Total friggin nonsense. You are butchering the definition of communism. FRAUD

    “when demographics will be such that there are enough non-whites within the country who demand “equal rights” (read: equal income, to be paid for by stupid whitey)”
    Typical nederlander nazi statement

    “Zuckerberg already flirted with a basic income for all.”
    Get a grip nederlander it was being toyed with in Finland and Switzerland too and probably elsewhere also.

    “Again, the US $ losing reserve currency status means a loss of GDP of 30-40%, meaning the US falling back to Romania levels. This will push US society to the brink of revolution.”
    Do you have references and links to support that statement Nederlander extremist? This decline of 30%-40% is likely coming globally but it will be with activities over a broad economic range and the drop will be all inclusive. We are talking more than GDP we are talking systematic issues that will occur that means the global economy will not recover. This is loss of economic potentiality with a break to lower operating abilities. Forget the fat we are talking the muscle. Nederlander, you don’t even understand how currencies work as referenced with your statement of 30%-40% decline because of reserve currency loss. What does that mean will happens with other currencies? Currencies don’t operate in a vacuum. Right, you have no friggen clue. This economic drop could be worse in Europe and Asia because of how over extended these places are with population and consumption and with economies driven by export.

  11. Davy on Tue, 2nd Jan 2018 6:01 am 

    Nederlander, tell me how this 30-40% loss of GDP is going to work again? Looks like it is mutually assured destruction instead. It points to another problem for your agenda. It means the global economy is going to take a huge hit at some point when the post war US dollar influenced financial system of globalization breaks down with catastrophic results for all and not just the US. It sucks being a binary extremist agendist peddling PBM and 100% renewable nonsense when reality bites both ways.

    “The Great Dollar Short-Squeeze Is Coming”
    https://tinyurl.com/yaza8zpe

    “Yeah, I think a better terminology would be short squeeze. It’s sort of a dollar short squeeze. And, again, if we think about the Eurodollar development from things all the way back as – some things like banker’s acceptances – it’s essentially a short dollar system, where every participant in it is short the dollar. They roll over funding every day, whether it be in repo or unsecured or in FX – or however it’s done – essentially everybody around the world needs dollars and therefore they’re short of them. So when the dollar supply becomes less malleable, less pliable, less dynamic, it becomes a problem for certain parts of the system being able to roll over their commitments. And what happens when you have to roll over your commitment and it’s not as easy to do so, the price of it goes up. And, in terms of currencies, a short squeeze in the dollar means a rising dollar or a falling counterpart currency.”

    “Some signs of this squeeze have already started to emerge, Snider argues. Back in 2014, the Russian Central Bank started auctioning Eurodollars and euros after the annexation of Crimea, when sanctions from both the European Union and US made it more difficult for Russian banks to obtain foreign currency. The RCB was effectively repositioning itself as the central distribution point for dollars in the Russian economy. Snider argues this is a symptom of being squeezed out of the dollar market.”

    “And the Russians were not alone in this. Brazil’s central bank also had to resort to creative derivative strategies to help create a large enough supply of dollars for its domestic economy. However, these strategies are unsustainable, as Brazil demonstrated. Almost immediately, the program was threatening to consume nearly all of Brazil’s foreign currency reserves.”

    “The monetary system in China is predicated on the dollar. And so selling down US Treasuries or US dollar balances has the effect of tightening Chinese money….These countries are almost in the position of mutually-assured destruction here. They can’t just sell off their own dollar holdings, because that would undermine their own currency. It would undermine their own monetary system….So I think that’s why we’re getting into Luke’s point, and to Mark’s point as well – the geopolitical concerns here is that, okay, the dollar system doesn’t work, but we’re stuck with it. So what the hell do we do? You kind of sympathize with their position, because it’s between a rock and a hard place….They have to work almost behind the scenes to try to get something of a workable alternative. Because they don’t have an alternative today. They cannot go with today getting rid of the dollar. Can’t ditch the dollar today. I think they would want to.”

    “I think that’s what scares me the most. Maybe the analogy’s a little different. To me the Chinese are increasingly desperate. You look at what they’ve done in ‘14–‘15–‘16–’17. They do increasingly desperate things. And it’s possible – to get to your point about a binary option here – they get to the point where they say screw it. You know what? We’ve resisted de-dollarizing as best we can because we don’t think there’s an alternative. Let’s just do it….Let’s just say tomorrow – I mean, because this isn’t working. We’re in a high-risk position. So why don’t we just say screw it.”

  12. bobinget on Tue, 2nd Jan 2018 11:34 am 

    https://www.finviz.com/futures_charts.ashx?p=d1
    World on sugar high.

  13. print baby print on Tue, 2nd Jan 2018 12:45 pm 

    Anyone , can explain please how much condensate ( tight oil) can be added to the real stuff maximum

  14. Boat on Tue, 2nd Jan 2018 1:31 pm 

    Google and learn. Tight oil varys widely. So does convential oil. There is no one answer. Some tight oil is worth more than convential oil, some is not.

  15. print baby print on Tue, 2nd Jan 2018 4:14 pm 

    ok thanks

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