US to become net oil exporter in November: EIA

US to become net oil exporter in November: EIA

US to become net oil exporter in November: EIA 

Imports projected to meet 8% of US demand this year

US net oil exports to average 550,000 b/d in 2020

The US will become a net oil exporter for the first time on a monthly basis in November, with crude and refined product exports exceeding imports by 220,000 b/d, the Energy Information Administration said Tuesday.

 

EIA sees the US continuing to be a net oil importer on an annual basis in 2019, with imports exceeding exports by an average of 620,000 b/d. Then the US will flip to annual net exporter in 2020, with exports exceeding imports by 550,000 b/d.

The US snagged the net oil exporter title for all of one week last November, driven by a surge of 3.2 million b/d in crude exports that pushed crude and product exports above 9 million b/d, according to S&P Global Platts Analytics.

The growth of the Gulf Coast refining sector made the US a net exporter of refined products in 2011. Rising crude exports since 2015 have made the overall net oil exporter status possible.

Still, US crude imports will continue to exceed crude exports by 4.43 million b/d in 2019 and 4.4 million b/d in 2020, EIA said.

IMPORT RELIANCE PLUMMETS

EIA's Annual Energy Outlook 2019 predicted in January that foreign oil would meet just 7.5% of US demand this year.

A decade ago, EIA forecast in its 2009 AEO that foreign crude would meet 44% of US demand in 2020. Imports met 60% of US consumption in 2006 and were projected to fall to 50% by 2010, according to the 2009 report. That was before the US tight oil revolution got underway in earnest.

EIA's projections have accelerated as US oil production growth keeps beating expectations.

Even just two years ago, EIA's 2017 AEO forecast the US remaining a net importer through 2050, with foreign oil meeting 17.7% of national consumption that year. Last year's AEO predicted the US would gain net exporter status in 2029 - nine years later than the current forecast.

President Donald Trump praised the net oil exporter milestone in his State of the Union speech to Congress in February, albeit before it actually happens.

"The United States is now the number one producer of oil and natural gas anywhere in the world. And now, for the first time in 65 years, we are a net exporter of energy," Trump said at the time.

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The US will maintain oil production despite falling prices, says deputy energy secretary

  • Despite low oil prices, shale producers in the U.S. will continue to produce 12 million barrels a day — which are all-time highs — throughout next year, and perhaps going up to as high as 13 million barrels, U.S. Deputy Energy Secretary Dan Brouillette told CNBC on Wednesday.
  • While shale drillers in the U.S. have been said to face obstacles on growing output, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.
  • Meanwhile, Chinese tariffs on U.S. natural gas will not put a dent in the country’s ambitions to be a top energy exporter, he indicated, citing high demand from the rest of Asia.
  • The U.S. will maintain its oil production — or even ramp it up higher — despite low energy prices and slowing economic growth, Deputy Energy Secretary Dan Brouillette said Wednesday.

    Shale producers in the U.S. will continue to produce a record 12 million barrels a day throughout next year, he said, citing projections from the Energy Information Administration. They may even go up to as high as 13 million barrels, he added.

     

    “U.S. production numbers are going to continue for quite some time,” Brouillette told CNBC.

    U.S. West Texas Intermediate (WTI) crude futures have fallen almost 20% since reaching their 2019 peaks in late April, as oil prices were dragged down by intensifying fears of an economic downturn that’s started to impact oil consumption.

    But Brouillette rejected fears that oil demand would be hit amid slowing growth.

    “Growth is slowing down slightly ... over the course of early 2019. But I suspect that as the economy begins to rev up, we’ll start to see that demand pick up as well. And it’s going to be good news for oil producers,” he said.

    On Wednesday, Brent crude futures were at $61.34 per barrel, and U.S. crude futures were at $52.40 per barrel — off this year’s highs of around $74 and $66 per barrel in April.

    Even though shale drillers in the U.S. have been said to face obstacles on growing output amid a wave of belt-tightening that’s cutting billions of dollars from budgets, and the number of operating oil rigs have declined this year, Brouillette said that production is not actually the biggest problem.

    “Our biggest challenge in the United States is not maintaining production, it’s actually getting the product to market. We are developing infrastructure ... at a rapid pace, but we need to do more. We need more pipeline capacity in order to have the oil and the gas reach these export markets,” he said.

    In fact, Brouillette said, there will be increased production, not falling output, in the U.S.

    Last year, the global appetite for natural gas grew at the fastest pace since 2010. Most of that supply is expected to come from the U.S., amid its ambitions to be a top liquefied natural gas (LNG) exporter.

    American gas output surged by 11.5% in 2018 — marking the fastest growth since 1951, according to the International Energy Agency. Currently, Australia and Qatar are the top two exporters of LNG, which is a form of the fuel chilled to liquid for transport by sea.

    But amid the trade war, Chinese tariffs on U.S. natural gas could put Washington’s ambitions on hold, with the Asian giant accounting for a large share of global demand and taking the spot as the world’s number 2 importer for LNG.

    Brouillette dismissed that notion, however, pointing to high demand from the rest of Asia.

    He said that sales to South Korea and Japan look “very, very large” relative to China. With Mexico numbers added to that tally, “the future looks pretty bright,” he added.

    “We still see continued LNG export growth all throughout the world,” Brouillette added.

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Big Oil’s growing shale footprint may stabilize US oil outlook: BP’s Dale

US tight oil production could become less sensitive to price volatility in the coming years as more cash-rich oil majors pile into the sector and commit to new development spending, BP’s chief economist Spencer Dale said.

Over the last two years, the concentration of investment spending by the top 10 US tight oil producers has started to rise, edging up to 50% from 45%, according to BP’s latest Statistical Review of World Energy, indicating that recent shale acquisitions by oil majors is feeding through to spending plans.

Uncertainty over longer-term global oil demand, the falling costs of drilling and fast development times for US shale have underpinned a strategic shift by many oil majors to prioritize shorter cycle returns from shale developments.

Major acreage holders in the key Permian US shale Basin include the supermajors Chevron and ExxonMobil with the scale of Occidental’s shale stake set to grow sharply following its recent $33-billion deal for Anadarko. Both BP and Shell have said they are looking to grow their production and footprint in US shale and unconventional oil projects.

“Big Oil has increased its footprint and the incentives for consolidation to exploit the benefits of scale and contiguous acreage have increased,” Dale said, presenting the Statistical Review.

“The intuition here is large oil companies have bigger balance sheets and so are able to smooth through variations in oil prices and capital and may make production less sensitive [to prices],” he said.

US production of tight oil and natural gas liquids from shale plays has bounced back from the 2014 oil prices slump, jumping by a record 2.2 million b/d last year, according to BP.

Continued IOC expansion into shale plays means the majors now make up some 18% of shale drilling activity in the US, Citi Group’s head of commodities research Ed Morse said last month.

With the role of oil majors in the US shale sector growing, Morse said some industry watchers are underestimating the growth potential of shale developments. The US could be producing more than 29 million b/d of oil and other liquids within just six years, over 50% more than current levels, Morse told an S&P Global Platts event.

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Citing a “growing mismatch” between hope and action, BP executives released the company’s annual Statistical Review of World Energy featuring slow progress on climate change and rapid growth in energy demand and emissions of carbon dioxide.

The report also noted that the US recorded the largest-ever annual production increases by any country for oil and natural gas, “the vast majority” coming from onshore shale plays.

Global energy demand grew by 2.9%, and carbon emissions grew by 2% in 2018, “faster than at any time since 2010-11,” BP said in a press release.

“There is a growing mismatch between societal demands for action on climate change and the actual pace of progress,” said Chief Economist Spencer Dale, citing the increases in energy demand and carbon emissions. “The world is on an unsustainable path.”

Natural gas consumption and production increased 5% last year and accounted for 40% of global energy demand growth.

Consumption of renewable energy grew by 14.5%, near the record increase of 2017, but still accounted for only one third of the increase in total power generation.

Global oil consumption grew by 1.5%.

The record production increments in the US were 2.2 million b/d for oil and 86 billion cu m for the year for natural gas.

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US crude oil exports buoyed by widening WTI/Brent spread

 

The US exported more than 3 million b/d of crude for the second week in a row in the week ended June 7, aided by macroeconomic factors that have made US oil prices more attractive.

According to S&P Global Platts Analytics data, more than 3.18 million b/d was exported from the US last week, down slightly from the estimated 3.35 million that was exported during the week ended May 31. The Energy Information Administration reported US crude exports averaging more than 3 million b/d since the week ending May 24.

At least 4 million barrels loaded last week are destined for delivery to India, including one VLCC cargo that was loaded June 4 on to the tanker New Prime at the Louisiana Offshore Oil Port. New Prime was chartered by Shell for the voyage, according to Platts’ fixtures reports.

It was not the only VLCC that loaded at LOOP last week. A second ship, the Captain X Kyriakou, chartered by Mercuria, was loaded and sailed from LOOP on June 2. That cargo of US crude is expected to be delivered to South Korea, according to Platts trade flow software cFlow.

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LOOP has rarely loaded two cargoes in one week since it began exports more than one year ago. The offshore facility typically loads about one cargo a month for export, and has the capacity to load some 900,000 b/d, according to company officials. LOOP declined to comment on the recent loadings.

The two VLCCs that loaded last week join another LOOP loading noticed in recent weeks. Coswisdom Lake sailed from LOOP on May 31 and is destined for Qingdao, China.

The US’ four-week crude oil exports average is 3.221 million b/d. It’s the first time that the four-week average has reached over 3 million b/d since March, according to EIA data. Various factors encourage and limit US crude exports. However, it is expected that more US crude will be exported in coming years as US production increases and infrastructure along the US Gulf Coast is expanded. Currently, the US Gulf Coast has the capacity to handle some 5.92 million b/d of crude.

Macro factors favor exports
US crude for export has benefited over the past four weeks from certain macroeconomic and geopolitical factors that have helped widen the Brent/WTI spread. Over the last four weeks, the Brent/WTI swap spread, an indicator of the competitiveness of WTI-based crudes versus their Brent-based counterparts, has averaged $8.23/b. In the four weeks prior, the swap spread averaged $7.71/b, while the four further weeks prior, the swap spread average $7.15/b.

20190611_WTIBrent.jpg

A widening swap spread is indicative of WTI-based crudes becoming more competitive in comparison to their Brent-based peers.

The factors affecting the Brent/WTI spread can be placed into two categories: demand-side and supply-side. On the demand side, lingering US-China trade tensions have created fear of an overall slowing of the global economy. Any dip in demand growth spurred by a cooling relationship between the world’s two largest economies has potential to disrupt global supply chains and investment.

US-China trade tensions have contributed to an overarching decline in momentum for European and Asian markets. Business confidence has weakened and economic indicators ranging from car production in Germany, investment in Italy, and external demand in emerging Asia have all been lackluster.

US crude oil stocks and OPEC-plus production cuts have driven supply-side concerns in the global oil complex. US crude stocks have trended upwards in 2019, with stocks climbing 6.77 million barrels in the week ending on May 31, and up nearly 40 million barrels since the start of the year, according to data from the EIA. With US crude production at record levels, and production in the Permian Basin forecast to grow 26% year over year in 2019, the global market is a natural outlet for the new barrels.

OPEC and partners, Russia in particular, sought to bring nearly 1.2 million b/d off the global market in the first half of 2019, a goal they accomplished and passed by 300,000 b/d in March. As a continuation of OPEC cuts is expected, and Saudi oil output at a four-and-a-half year low, US crude exporters are well positioned to grow market share.

WTI FOB with a loading window from June 22 to July 22 was assessed by S&P Global Platts on June 7 at a $7.30/b premium to the WTI strip. That represents a 31 cents/b premium to July barrels of WTI at the Magellan East Houston Terminal.

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Abundant oil supply prevented spike to $140/b after ship attacks – US DOE deputy

 

A “very well-supplied” oil market prevented prices from spiking to $140/b last week when two oil product tankers were attacked near the Strait of Hormuz, US Deputy Energy Secretary Dan Brouillette said in an interview with S&P Global Platts.

The ship attacks and concerns about oil supply security have dominated talks among delegates at the G20 energy and environment meetings in Japan.

Saudi Arabia’s energy minister Khalid al-Falih said Saturday that the attacks have damaged global confidence in oil security, and he called for a “rapid and decisive response” to the threat to energy supplies.

International Energy Agency chief Fatih Birol said Friday that the group was very concerned about the attacks. He said IEA was ready to respond in the event of a supply disruption with a range of options, from providing members immediate policy advice to coordinating a release of emergency oil stockpiles.

Brouillette’s agency manages the US Strategic Petroleum Reserve, which currently holds 644 million barrels of crude oil. Asked if the Trump administration would tap the SPR in response to a blockage of the Strait of Hormuz, he said: “The SPR is intended for large disruptions in the marketplace.”

“I can’t tell you without knowing the details whether this particular event constitutes an emergency under the federal law,” Brouillette added. “But it’s these types of events we look at with regard to release of the SPR.”

RISING US EXPORTS

Brouillette’s message to G20 delegates focused on rising US oil and LNG exports and US producers’ willingness to meet the energy needs of Asian and other customers.

Some analysts have questioned whether the world can absorb all the light sweet crude the US is projected to export in several years, given complex refiners’ reliance on heavy crudes. US sanctions against Iran and Venezuela have removed mostly heavy crude from the market.

Brouillette dismissed the crude quality concerns. He said Gulf Coast refiners have started adjusting operations to make use of more light crude, while there has been an uptick in alternative heavy crude sources, such as offshore Gulf of Mexico production.

On LNG exports, Brouillette said China’s retaliatory tariffs and trade policy uncertainty have not damaged the prospects for the US LNG industry. He said sales to South Korea, Japan and Mexico make LNG exports to China “almost a rounding error.”

“The trade conversation with China at the moment has very little impact on US LNG production or exports,” he said.

LNG COMPETITION

Brouillette added that the US is not worried about competition from LNG export terminals in British Columbia, Canada, which hold a location advantage to Gulf Coast ports as cargoes can reach Asia quicker.

“We hope they enter the market because it means cheaper gas for everybody,” he said. “It only makes us better competitors and more efficient operations if they enter the market. We face fierce competition from Australia, Qatar and others already.”

On reports that Russia is boosting gas shipments to Europe to test the limits of US LNG exports, Brouillette said Europe’s access to US LNG imports has forced Gazprom to cut its prices.

“That’s good for consumers in Europe,” he said. “More and more countries are starting to realize the argument around diversity of supply and diversity of suppliers in particular.”

US energy secretary Rick Perry met last week with Polish President Andrzej Duda at Cheniere’s Sabine Pass LNG terminal near the Texas-Louisiana border.

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Phillips 66 is looking to build an offshore export terminal in the Gulf of Mexico, a project that would join a growing list of facilities being planned to handle the growing shipments of U.S. shale oil.

The proposed deepwater port would be located about 21 nautical miles off the Texas coast, near the Port of Corpus Christi, the company said Wednesday in a statement. Phillips 66, the largest U.S. refining company by market value, would construct two parallel pipelines to carry crude to the facility’s two floating jetties, known as single-point mooring buoys, according to people familiar with the matter, who asked not to be named because the plan hasn’t been announced.

Any offshore terminal would require approval from the U.S. Coast Guard and the U.S. Department of Transportation’s Maritime Administration.

The proposed project “would provide an additional safe and environmentally sustainable solution for the export of abundant domestic crude oil supplies from major shale basins to global markets,” Dennis Nuss, a spokesman, said in an emailed statement.

Phillips is already a partner in a venture to develop a deepwater marine terminal in Ingleside, Texas. Going ahead with an offshore project as well would put the company in direct competition with commodity trading house Trafigura Group Ltd., which is developing its own terminal in the Gulf of Mexico. That proposal has faced opposition from the Port of Corpus Christi, which along with The Carlyle Group is developing an onshore export terminal.

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