U.S. Crude Oil Exports Set to Double by 2022

(November 4, 2019) — U.S. crude oil exports could grow from current levels of 2.9 MMbbld to nearly 6 MMbbld by 2022, according to a new forecast from Rystad Energy. With U.S. production expected to increase by 1.2 MMbbld year over year in 2020, and with domestic refineries already maxing out capacity to absorb shale growth, Rystad Energy expects oil exports to bal- loon and reach 4.7 MMbbld by the end of 2020 and nearly 6 MMbbld by the end of 2022.

“Crude exports will grow on the back of new infrastructure coming online in Corpus Christi, Texas, and as international crude buyers ramp up efforts to diversify their import sources after the attacks on oil facilities in Saudi Arabia and overall rising tensions in the Middle East,” said Paola Rodriguez-Masiu, a senior analyst on Rystad Energy’s oil market team.

U.S. crude exports slowed significantly in the third quarter of 2019 after reaching a record level of nearly 3.2 MMbbld in June 2019. This recent slow- down was related, in part, to the narrowing of the Brent-West Texas Intermediate spread, along with headwinds from the 5% tariff imposed on U.S. oil imports by China, the third-largest buyer of American crude year to date. However, Rystad Energy forecasts that exports will rebound to an unprecedented 3.7 MMbbld during the fourth quarter of this year before climbing to even higher levels.

“This surge in crude shipments from the U.S. will be made possible by a flurry of new pipelines and export terminal infrastructure coming online in the coming years,” Rodriguez-Masiu added.

While the U.S. has only one port capable of fully loading very large crude carriers (VLCCs), as much as 38% of American crude exports are ulti- mately loaded onto such vessels since they are the most cost-efficient for long-haul destinations. To achieve this, exporters load most of their volumes through a complex, time-consuming, and costly process known as reverse lightering, which involves smaller-size carriers being loaded at onshore ports. These tankers subsequently fill larger ships off the coast.

“In order to reduce the need for expensive reverse lightering operations, midstream investors have poured resources into deepening the draft of existing onshore terminals to allow partial loading of VLCCs,” Rodriguez-Masiu said. “But to maximize loading efficiency, deeper ports are needed offshore that can enable VLCCs to be fully loaded.”

(SOURCE: The Weekly Propane Newsletter, November 4, 2019)