US oil exports hit worldwide markets, undercut oil prices

crude oil exports
Ban on US oil exports lifted by the Obama administration in 2015, opening up global crude market to US producers. Photo by Lou Vest.

The ban on US oil exports was lifted by the Obama administration in 2015, opening up global crude market to US producers. Getty Images photo.

In 2015, the Obama administration lifted a 40-year ban on US oil exports.  Since then, tankers filled with US crude have sailed to over 30 countries, including highly sought after markets including China and India.

Thanks to the ending of the ban and rising US production, OPEC members and other producers are losing market share to US producers.

According to Reuters, in 2005, prior to the shale revolution, the US imported 12.5 million barrels per day (b/d) of crude and fuels.  Currently, US crude and fuels imports amount to 4 million b/d.

Today, US producers export between 1.5 and 2 million b/d and that could rise to about 4 million b/d by 2022.  The International Energy Agency says the US output is forecast to account for over 80 per cent of global supply growth in the coming decade.

Much of the exports will be sold to China, the world’s top importer and the largest buyer of US crude, other than Canada, since November.  The export boom has filled crude pipelines and led to massive investment in new Gulf Coast shipping infrastructure.

“U.S. crude flowing to Asia is a major trend in global oil trading,” Chen Bo, president of Unipec, told Reuters.  His firm expects to double its US imports to 300,000 b/d.  The company is also considering long-term crude supply deals with US pipeline and terminal operators and may partner with these companies to expand and improve this infrastructure.

Sinochem Group, China’s state-owned chemical and oil conglomerate, plans to open a trading office in Houston in 2018.  The office will source US crude for China’s teapot, or independent refineries, according to a Reuters’ source.

US production is now in line with Saudi Arabia and is closing in on the world’s top producer, Russia.  Russia’s output is 10.9 million b/d.

The US Energy Department is forecasting US crude output will hit 11 million b/d by the end of the year.

“The bulk of that growth will likely be exported,” David Fyfe, chief economist at global commodity trading firm Gunvor Group told Reuters.

US crude imports have also fallen and now sit at 7.6 million b/d from a peak of 10.6 million b/d in 2006.  According to Reuters, OPEC’s share of US imports has dropped by more than half to about 37 per cent as the US relies more on its own production and Canadian output.



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