Thanks to Shale or we would be paying 4-5$+ for gas!!! Monthly U.S. crude oil imports from OPEC fall to a 30-year low

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Monthly U.S. crude oil imports from OPEC fall to a 30-year low

Monthly U.S. crude oil imports from OPEC fall to a 30-year low

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

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U.S. imports of crude oil from members of the Organization of the Petroleum Exporting Countries (OPEC) in March 2019 totaled 1.5 million barrels per day (b/d), their lowest level since March 1986, based on data in EIA’s Petroleum Supply Monthly. U.S. crude oil imports from OPEC members have generally fallen over the previous decade as domestic crude oil production has increased.

From the early 1980s through the late 2000s, OPEC member countries were the source of about half of all U.S. crude oil imports. In the past decade, however, total U.S. crude oil imports have fallen and OPEC’s share of those imports has decreased. Non-OPEC countries such as Canada, Mexico, Brazil, and Colombia have made up larger shares of U.S. crude oil imports. In each of the past four years, Canada alone has supplied more crude oil to the United States than all OPEC members combined.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

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Through the first three months of 2019, U.S. crude oil imports from OPEC members Venezuela and Iraq have fallen the most. In 2018, Venezuela was the source of 505,000 b/d of U.S. crude oil imports, or 20% of the OPEC total. In March, the United States imported just 47,000 b/d of crude oil from Venezuela. Preliminary weekly import values show several weeks in March and May when the United States imported no crude oil from Venezuela.

U.S. sanctions directed at Venezuela's energy sector generally and Petróleos de Venezuela, S.A. specifically have driven U.S. imports from Venezuela to recent low levels. Before the United States imposed the sanctions, U.S. imports had been declining as long-term mismanagement of Venezuela’s oil industry, and widespread power outages since the beginning of this year have led to significant declines in Venezuelan crude oil production.

U.S. crude oil imports from other OPEC members also declined following a November 2016 agreement by OPEC members and a number of non-OPEC producers to cut crude oil production. As a result of the production cuts, many OPEC members reduced exports to the United States in favor of growing markets in Asia. In the first three months of 2019, the volume of U.S. crude oil imports from Saudi Arabia and Iraq—the two largest sources of imports from OPEC in 2018—have averaged 26% and 28% below their 2018 average levels.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

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In 2018, the U.S. Gulf Coast region (defined as Petroleum Administration for Defense District 3) imported 1.4 million b/d of OPEC crude oil, or 55% of the national total of OPEC imports. With the recent decline, the U.S. Gulf Coast imported just 513,000 b/d from OPEC in March 2019. U.S. Gulf Coast imports of OPEC crude oil in March were below those for the West Coast region, marking the first time on record that the Gulf Coast region was not the predominant import area of OPEC crude oil in the United States.

For total crude oil imports, the Midwest (defined as Petroleum Administration for Defense District 2) has received more crude oil than the Gulf Coast in every month from November 2018 through March 2019, the latest available monthly value. Nearly all of the Midwest’s crude oil imports come from Canada.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

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The decline in Gulf Coast crude oil imports and the recent rise in crude oil exports has led the Gulf Coast region to be a net exporter of crude oil in every month from November 2018 through March 2019. More than 90% of the U.S. crude oil exported since the start of 2018 has been shipped from Gulf Coast ports.

A recent This Week in Petroleum analysis provides more insight on recent changes and long-term trends in Gulf Coast crude oil supply.

 

https://www.eia.gov/todayinenergy/detail.php?id=39852

 

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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.

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.

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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OPEC’s Battle for Control of the Oil Market

 

Oil supply is confounding expectations. At Wood Mackenzie, we have just raised our forecasts for non-OPEC production, the latest in a series of incremental increases.

Cumulatively, we’ve increased volumes for 2025 by an astonishing 9 million barrels per day (b/d) compared with our forecasts in 2016, the oil price nadir. Non-OPEC supply has already bounced from the 2016 low of 54 million b/d and will touch 60 million b/d this year.

Our latest Macro Oils Long Term Outlook expects a peak of 66 million b/d in 2025, 5% above our forecast last year. Oil demand too has grown more quickly than expected, up 6 million b/d on 2016 forecasts.

Production keeps on growing despite structurally lower oil prices and upstream investment still 40% below peak.

Did we, like many others, underestimate the industry’s ability to adapt and innovate in the face of financial adversity – and keep on producing oil? Maybe. But where on earth is it all coming from? Dougie Thyne, Director of Oil Supply Analysis, identifies four main buckets.

U.S. Lower 48: tight oil and natural gas liquids (NGLs) together contribute 4.3 million b/d, half of the increase versus 2016. This primarily reflects the emergence of the Permian basin as the dominant tight oil play.

The delineation of sweet spots, more efficient drilling, and the present shift to industrialized exploitation have led to a significant improvement in Permian well economics.

Innovation has boosted expected recovery from the more mature Bakken, Eagle Ford and Scoop-Stack plays to a lesser extent.

NGLs associated with the gassier parts of the Permian and shale gas plays make up about one-third of the U.S. Lower 48 increase.

Russia: our forecasts for 2025 are 1.4 million b/d higher than three years ago, in spite of sanctions which restrict inward investment and the transfer of the latest technological advances.

The weakness of the ruble has buoyed upstream margins in Russia since the price fell, supporting higher investment, including an intense drilling program in deeper, low-permeability plays in West Siberia.

Sanction of some greenfield projects has been deferred by Russia’s involvement in OPEC+, effectively pushing new volumes out by a few years.

Guyana: only the original Liza discovery was in our 2016 forecasts. We’ve added another 0.5 million b/d by 2025, reflecting multiple subsequent deepwater discoveries. First production is due in 2020, setting Guyana on track to enter the top 12 non-OPEC producers with over 1 million b/d by the end of the decade.

Mature producers: Together, these have added over 2 million b/d compared with our 2016 forecasts. Colombia, UK, Norway, U.S. (Alaska) and Canada are among a plethora of countries which have surprised on the upside.

Cost cutting, efficiencies, reduced maintenance outages, high-grading and streamlining of new projects, new discoveries tied into existing infrastructure and, in some cases, reduced tax rates have combined to slow decline rates and boost production.

There are valid questions whether production from ultra-mature basins is sustainable at these rates, or volumes are merely being accelerated. As a result, some of these producers are slated to see steeper declines.

Non-OPEC supply won’t grow at this rate forever – in fact, it stops after 2025 as tight oil plateaus, with decline setting in by 2030. In the meantime, the OPEC+ strategy to boost revenues by constraining production and buoying up price has helped its competitors boost production and gain market share.

We estimate non-OPEC production will swallow up 4.3 million b/d, or 76%, of contestable demand over the next five years. OPEC’s scope to increase volumes through this period is limited to just 1.3 million b/d.

The mathematics sits at odds with Abu Dhabi, Kuwait and Iraq which are investing heavily in new capacity. Some producers in OPEC do see flat or declining volumes in this period.

Major supply outages are helping OPEC+ to balance the market today. Disruptions are set to leap to a record 5 million b/d later this year, including 2.5 million b/d from Iran (sanctions) and Venezuela (economic meltdown and U.S. sanctions).

It may suit the rest of OPEC, as well as the U.S., if exports from Iran and Venezuela are kept off the market for some years – at least until non-OPEC production growth shows signs of abating.
Source: Wood Mackenzie

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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.