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.
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.
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.
twocats on Sun, 6th May 2018 7:59 am
These little articles are so sad and cute – like lost puppies.
Back in the real world – but related to this topic – the US is in serious need of funding through Treasury purchases in the coming months (like a trillion or so in tandem with the Fed not talking about purchasing). Not at all being dramatic, this could send interest rates towards 3.5 or 4% (they’ve recently briefly breached the 3% level). If this happens the dollar will continue to strengthen (sorry Boat – not a good thing) and credit will tighten.
Since we have a lot of really really unintelligent posters here I’ll guide you to the final link in this chain. Credit tightening is like kryptonite to the Frack industry. It could also cause downturn in China, Europe or any other country with large amounts of loans fixed in dollars (e.g. Turkey). This contagion could easily spread back across the globe, cause an economic downturn – also hurting Frackers (i.e. less investment cash). Or crush demand (lower oil prices – less cash flow – frack industry continues to hemorrhage cash and investors finally walk away).
So not only is the article a lie based on a very crude distortion of facts, even the lie probably won’t be true for very long.
Cloggie on Sun, 6th May 2018 8:15 am
“Cloggie, yes it does. ANY energy input that is required to get that panel made and hooked up on your roof is part of the total energy required to get your “renewable” electric. Including his salary, bennies, etc. ALL energy input that makes the panel possible is added in. The list is almost endless, starting at the mines. THAT is why the so called “renewables” are not renewable without FF input. To ignore that is to be in denial.”
It doesn’t. In this way you can always pile up “energy inputs” to arrive at the desired result, namely that renewable energy doesn’t work.
It also ignores that the produced solar panels do produce energy with which you can do things, like driving to your work at a solar panel plant.
Everybody knows what a meter or a kilo or a degree Celsius is. There is no disagreement about it. With EROEI there isn’t agreement, hence it is worthless, although the concept “energy return on energy invested” is not worthless.
Harquebus on Sun, 6th May 2018 4:42 pm
“In this way you can always pile up “energy inputs” to arrive at the desired result, namely that renewable energy doesn’t work.”
Conversely, one can deny the energy inputs to the equation in order to get the desired result. This is the usual case.
The worthlessness of current EROEI equations stems from distorted energy input calculations. Garbage in, garbage out.
Boat on Sun, 6th May 2018 6:23 pm
The name of renewables is now FF light, FF value added, FF’s little brothers with less death, cleaner air with FF add ones. Or let’s just call it renewables because it’s grandfathered in. Liberal women like name changes also. Lol