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Page added on April 1, 2014

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US Taking on More Saudi Oil Despite Shale Glut

Consumption

The U.S. Energy Department said imports from OPEC increased year-on-year, with Saudi Arabia accounting for the bulk of additional oil. While oil production from the United States has increased, the data show the global market is still interconnected.

The U.S. Energy Information Administration reported the amount of petroleum imported from members of the Organization of Petroleum Exporting Countries was 3.57 million barrels per day in December, the last full month for which data are available from EIA.

While only 0.5 percent higher year-on-year, the increase suggests the global energy market is still interconnected despite the success of shale. Imports from Venezuela, the No. 2 OPEC exporter to the United States, declined 22 percent from December 2012 to 846,000 bpd. Petroleum imports from Saudi Arabia in December, however, were 1.5 million bpd, a 47 percent increase year-on-year.

For non-OPEC members, the United States imported about 1 million bpd from Mexico in December, relatively static year-on-year. Imports from Canada, however, rose to 3.3 million bpd, a 5.4 percent increase from December 2012.

U.S. Sen. John Hoeven, R-N.D., said last week energy security concerns in Eastern Europe should serve as a reminder of the need to encourage more production at home. Russia’s control over natural gas transit networks in Ukraine illustrates the importance of development oil and gas resources in North American for the sake of energy security. More production, he said, “is central to economic and national security.”

North Dakota, the No. 2 oil state in the country, produced 933,128 bpd in January and most of that came from the lucrative Bakken shale formation. North Dakota oil production is expected to top the 1 million bpd this year. State data show an all-time record of 976,453 bpd in November.

The U.S. Energy Information Administration said in its short-term market report a rough winter has curbed domestic oil production. A colder-than-normal winter in the United States meant higher withdrawals of energy products used for heating. What EIA described as “harsh winter conditions,” meanwhile, meant well completion in northern states like North Dakota was down. This in turn caused the administration to revise downward the estimates of U.S. crude oil production.

President Obama met last week in Riyadh with Saudi officials to reassure one of Washington’s more reliable regional allies the bilateral relationship was still important in the era of U.S. oil dominance. Energy independence, however, is the prevailing trend in the U.S. oil market and East Coast refineries that normally rely on foreign crude are sourcing more Bakken oil with increased rail traffic. A strong link to OPEC markets, however, shows the United States won’t break off completely. While the glut of North American crude oil will reshape the markets, it can’t logistically redefine them.

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11 Comments on "US Taking on More Saudi Oil Despite Shale Glut"

  1. Plantagenet on Tue, 1st Apr 2014 12:04 am 

    The US does not have a “glut” of oil.

    The US is still importing millions of barrels of oil each day.

  2. Nony on Tue, 1st Apr 2014 12:26 am 

    I guess we don’t have a glut of gas either. Even at 2$, we didn’t have a glut of gas. (After all we were importing some Canadian gas…that had no home.)

    Or…maybe helpful to think through price, not just volume. What does the differential tell you…hmm…

  3. TIKIMAN on Tue, 1st Apr 2014 12:41 am 

    Saudi oil is better quality than most other oil. Might as well nab it up!

  4. rockman on Tue, 1st Apr 2014 1:28 am 

    “A strong link to OPEC markets, however, shows the United States won’t break off completely. While the glut of North American crude oil will reshape the markets, it can’t logistically redefine them.”

    These idiotic spins are really irritating. I’m not going to be my usual kind self and write this off to ignorance. I label it intentional misrepresentation. The KSA owns a 50% interest in a huge amount of US refining capacity with the latest gain of 600,000 bbls/day with the Motiva refinery in Texas. The only surprise would be if the KSA had not been shipping OIL THEY OWN TO US REFINERIES THEY OWN, for Dog’s sake. Of course the Saudi gov’t “won’t break off completely” from the US after they’ve invested $billions in refineries here. They also own two other major refineries in La. Had it not been for severe operational screw-ups at Motiva the Saudis would have been exporting more of their oil sooner. BTW the Dutch own the other 50% of the refinery operation.

    And they make the point that Motiva can readily handle the Canadian oil sands production. And while the Canadians have promised they won’t export their production out of Texas there no promise or restriction to exporting refined products made from their oil. And as we recall the southern leg of Keystone XL began delivering 600,000 bbls/day of that Alberta production last January. And, coincidentally, guess what the nominal capacity of Motiva will be once they fix their engineering blunders:

    “On 31 May 2012 a turning of the valve ceremony took place at the Port Arthur refinery, celebrating the completion of a five year construction project that more than doubled the facility’s daily processing capacity to 600,000 barrels of crude.”

    And you can search till the cows come home and you won’t find how much Saudi oil is coming into the Motiva system. I’ve tried. But a good bet is that it will match the increased oil imports the KSA is sending to the US as a “show of their support” for our country.

    Support my ass. As always just follow the money.

  5. Boat on Tue, 1st Apr 2014 3:35 am 

    rockman
    I read the Saudis supply 75% of the oil going to Motiva. The expansion you were talking cost 10 billion. Another factoid I have been mentioning is many of the gulf refineries are burning NG instead of oil to refine their products. Another great reason for the Saudis to refine Saudi oil.

  6. Davy, Hermann, MO on Tue, 1st Apr 2014 10:08 am 

    Rock, as always you drop some very pertinent data to chew on. Some political ideologues here and out in the big world would love for life to be more interesting and lively like our resident Arthur but Oil likes to follow the money. It has been that way since the beginning and it is a big reason for success with the oil players. If you don’t follow the money in such a large and difficult business you don’t make it

  7. Arthur on Tue, 1st Apr 2014 10:35 am 

    Some glut…

    http://en.wikipedia.org/wiki/File:Crude_oil_prices_since_1861.png

    Argument ‘lively’ enough, Davy? 😉

  8. Davy, Hermann, MO on Tue, 1st Apr 2014 10:58 am 

    Yeap, looks ominous Arthur, hows the weather over there?

  9. rockman on Tue, 1st Apr 2014 12:08 pm 

    Boat – Excellent point about the NG. And until recently I didn’t realize that the Motiva Group ran two other large refineries in La. in addition to the one in Port Arthur. What will be interesting to see if the KSA starts shipping more oil somewhere else (like China) as their US plants get access to more oil sands production. They do make a point on their website that the PA plant can handle the heavy nasty stull be it from Canada of Venezuela

  10. Boat on Tue, 1st Apr 2014 4:06 pm 

    Time will tell but I would predict Refineries in the future will be built or retrofitted where there is low priced NG to fuel the refining process. This is why we export over 3.5 mbpd of finished petroleum products.
    I am bullish on the gulf refining area because of the Eagle Ford and the future Mexico development.

    Rock, you are much more of an expert than me. At what price point would it be cheaper to refine with oil vrs. nat gas. To me this is the tipping point for importing oil just to refine and reship.

  11. rockman on Tue, 1st Apr 2014 4:33 pm 

    Boat – I’m not much of an expert of refining but on the Gulf Coast I doubt it will ever be more economical to use anything other then NG. The only other advantage might come from using low value liquids coming out of the refining process itself. I suspect one reason the KSA and the Dutch did the largest refinery upgrade in history at Motiva. is the prospect for long term NG supplies especially if prices continue to creep back up. The shale gas boomed proved we had the reserves IF prices get high enough. Given how the PO future looks it would seem like Texas will become one of the major global refining hubs. I think some folks are finally starting to realize that much of the global refined product market has outsourced much of the effort to the US.

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