Fear about supply interruption isn’t the frantic force it used to be in the crude oil market. A deadly confrontation that might have pushed the U.S. and Iran to the verge of war raised the spot Brent crude oil price to above $70/bbl early in the week of January 6. Despite continuing regional concerns, the price quickly subsided. By January 13, Brent spot had fallen to $64.14/bbl, its lowest point since December 3. Before the Shale Era, a U.S.-Iranian face-off may well have launched Brent crude to well over $100/bbl as oil traders blew fuses over the heightened possibility of disruption to Persian Gulf oil production and transportation. There’s nothing like adequacy of supply, globally dispersed, to keep things calm — or at least calmer than they would have been if the U.S. and Iran had drawn so much sword a dozen years ago. In this blog, we’ll discuss where U.S. crude exports have been heading, how close the oil gets to strategically touchy areas, and whether the market still has reason to worry about disruption to oil supply.
In the four years since Congress and then-President Obama lifted the crude oil export ban in December 2015, export volumes have risen steadily. For the week ended December 27, 2019, the Energy Information Administration (EIA) reported record-high daily average exports of 4.5 MMb/d. The rate eased back to a still prodigious 3.5 MMb/d for the week ended January 10, 2020. To handle all of those new exports, the oil industry required expansion and adjustment of the logistical infrastructure — hot topics in the RBN Energy blogosphere. In our blog series on Exportin’ from the Free World, we covered the existing and planned storage facilities and marine terminals needed to support rising exports as production increased in the Permian, Niobrara, Bakken, and other unconventional oil plays. Much of the attention went to projects in the important ports of Houston and Corpus Christi, the latter of which set a crude-export record when the new Cactus II and EPIC pipelines came online and the new Eagle Ford Terminals and West Dock at IGC Terminal started up (Things Have Changed). We also highlighted issues affecting other shipping centers, such as the competition among pipelines to serve Louisiana refineries and terminals (Sweet Louisiana) and a disconnect in the Beaumont-Port Arthur, TX, area between crude volumes available for export and actual send-out capacity (Where Will You Go). By October 2019, we were predicting that expansions would eclipse greenfield construction projects as U.S. production showed signs of slowing and as concern grew about overbuilding (Let It Go). And we’ve kept attention on the economic advantages of Very Large Crude Carriers (VLCCs), as well as the limited (but slowly growing) abilities of U.S. ports to accommodate ships that large, and the need for reverse-lightering at sea until more deepwater export capacity is built (Rock the Boat).
U.S.-sourced crude now travels all around the world. Figure 1, from RBN’s weekly Crude Voyager report, shows planned destinations by region for crude tankers loaded from Gulf Coast terminals or offshore lightering areas for the weeks ended January 10 and 17, 2020 (numbered light gray and dark gray boxes). Foggy conditions on the Gulf Coast over the past several days reduced the number of loadings to nearly all destination regions. Week-to-week Gulf Coast departures decreased to Northwest Europe, which slipped from 10 to 5 (blue rectangle), the Mediterranean, down from 5 to 0 (yellow rectangle), Latin America, from 8 to 4 (orange rectangle), and Asia Pacific (APAC) from 4 to 2 (green rectangle). Only departures for Canada were unchanged at 2 (purple rectangle).
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