As US Crude Exports Soars, Here Are The Biggest Foreign Buyers Of US Oil

Tyler Durden's picture

Strange things are happening in a world continues to find itself with "low-priced" oil and an unprecedented gasoline glut, the latest of which is an unexpected boon for US fuel makers as Latin American refineries quietly go bust.

As Bloomberg writes, from Brazil’s Petroleo Brasileiro SA to Mexico’s Petroleos Mexicanos, state oil companies have failed to complete nine projects worth at least $36.4 billion that would have supplied 1.2 million barrels of gasoline and diesel daily. U.S. refiners have stepped up to help fill the gap, with exports almost doubling in the past six years, according to the U.S. Energy Information Administration. Falling oil prices, high levels of debt and failure to find partners to help finance the plants are among the reasons cited by Pemex, Costa Rica’s Refinadora Costarricense de Petroleo SA and Colombia’s Ecopetrol SA for postponing their plans. Brazil’s Petrobras has been slowed by the price drop as well as a corruption scandal.

“Refinery investment plans in the region have really fizzled out over the past year or so,” Mara Roberts, a BMI Research analyst based in New York, said in an e-mail. “Latin America is keen to take in growing U.S. supplies.” As a result, US exports to the region have been rising steadily and reached a record 1.88 million barrels a day this year. Latin America now accounts for 42 percent of America’s fuel exports, up from 38 percent a decade ago. U.S. fuel output increased 4.1 percent over two years to a record 19.9 million barrels a day in 2015, EIA data show.

US gasoline exporters aren't the only ones benefiting from current conditions. As the EIA writes in its most recent blog post, since the removal of restrictions on exporting U.S. crude oil in December 2015, the number of countries receiving exported U.S. crude has risen sharply. These exports have occurred despite a sustained narrow price premium of international crude oil prices over U.S. domestic crude oil prices, the many costs associated with arranging cargoes for export, and falling U.S. crude production.

In the first five months of 2016, U.S. crude oil exports averaged 501,000 barrels per day (b/d), 43,000 b/d (9%) more than the full-year 2015 average. This rate of growth is significantly slower than before the restrictions were lifted, when year-over-year growth from 2012 to 2013 was 100%, and then 162% from 2013 to 2014 (Figure 1). However, after the lifting of restrictions, the number and variety of destinations for U.S. crude oil exports has changed. So far in 2016, crude oil was exported to 16 different nations, six more than 2015 and double the number of destinations in 2014.

Before the removal of export restrictions, most U.S. crude oil shipments were to Canada. In recent years, crude exports to destinations other than Canada were re-exported volumes of foreign crude or an occasional cargo of Alaskan crude, which was exempt from export restrictions.

In March 2016, total crude oil exports to countries other than Canada exceeded those to Canada for the first time since April 2000, 259,000 b/d versus 249,000 b/d. In May 2016, when total U.S. crude oil exports reached 662,000 b/d; exports to countries other than Canada exceeded exports to Canada by 46,000 b/d (Figure 2).

 

Aside from Canada, the largest and most consistent U.S. crude export destination for the first five months of 2016 has been Curacao, located in the Caribbean Sea north of Venezuela; exports averaged 54,000 b/d through May (Figure 3). Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela, operates the 330,000 b/d Isla refinery on Curacao, as well as crude and petroleum product storage facilities on the island. Trade press reports indicate that U.S. crude exports to Curacao are likely being used as diluent, blending a light U.S. crude with a heavy Venezuelan crude, for either processing at the Isla refinery or for re-export to PDVSA customers.

Exports to the Netherlands, the second-largest non-Canadian destination for U.S. crude oil, averaged 39,000 b/d through the first five months of this year. Two of the three cities that collectively are the large refining and petroleum product trading hub of Amsterdam, Rotterdam, and Antwerp, known as the ARA, are located in the Netherlands. Other Western European nations, including Italy, France, and the United Kingdom, also rank high on the list of U.S. crude oil export destinations.

The Marshall Islands, a group of islands in the Pacific Ocean, is the fifth-largest non-Canadian destination for U.S. crude oil exports in 2016, averaging 14,000 b/d through May. With no refineries, the Marshall Islands are unlikely the final destination, but rather may be the location of ship-to-ship transfers for delivery to destinations in Asia, or a point at which a cargo of crude oil would await a buyer in Asia. U.S. Customs and Border Protection documentation requires the final destination of an export, if known. Therefore, cargoes that will undergo ship-to-ship transfer or that do not have a buyer prior to loading will cite the jurisdiction of the transfer, not the cargo's actual final destination.

The costs involved in exporting a cargo of crude oil can vary significantly. Transporting crude to a port, storage, loading, shipping, and other costs typically require large price spreads to make a transaction economic. Recent exports are occurring during a period when the price of Brent crude oil (the benchmark for global seaborne crude) has held a narrow premium to West Texas Intermediate (WTI, the U.S. benchmark), limiting the positive economic options for exporting U.S. crude. Through early August 2016, WTI averaged about $0.31 per barrel (b) less than Brent, despite a recent widening to $1.08/b for the week ending July 1 (Figure 4).

Available shipping options can provide opportunities for crude exports despite a narrow price spread. For example, the recent cost of booking a tanker for a spot shipment of crude oil has been the lowest since 2009. Also, if either a buyer or a seller of exported crude oil has a tanker on time charter (meaning the vessel’s time has already been paid for a set period, fixing its cost), the vessel may operate independently of tanker rates. Another shipping option is to book a back-haul voyage, the trip a tanker would normally make empty while returning to a port to load its next cargo. Back-haul voyages can be significantly discounted from regular tanker rates. Refineries in the ARA and in the rest of Western Europe actively trade with markets and refineries in the United States, using both clean (refined cargoes) and dirty (less refined or unrefined cargoes) tankers. Trade flows between Europe and the U.S. Gulf Coast, which primarily use dirty tankers for transporting crude and less refined products such as residual fuel oil, provide opportunities for back-haul cargoes of U.S. crude oil.

In addition, sellers of U.S. crude can use several methods to entice buyers despite unfavorable price spreads. A particular cargo or grade of crude oil can be discounted from a benchmark based on quality variations, such as API gravity, sulfur content, or other specifications. With the hope of continued purchases in the future, marketers of U.S. crude for export may offer buyers price discounts on sample or test cargoes, so that refiners may become more familiar with the crude and its compatibility with their refinery and desired product yield. This may explain some of the sporadic, typically small-volume crude oil export patterns to some countries in Asia, Europe, and elsewhere.

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Hohum's picture

And yet the USA imports 8-8.5 M barrels per day.  What a wonderful world.

azusgm's picture

Since the Saudis own the largest refinery in the US, we can bet the Saudi crude will keep on coming.

Thank the State dept for signing off on that deal.

venturen's picture

whatever happen to the story...that US didn't have enough rifineries?

azusgm's picture

The Motiva refinery was a joint venture among Texaco, Shell, and Saudi Aramco. Texaco (Chevron), the interest with an American-owned parent company, sold out to the other two during the Chevron-Texaco merger. It is now becoming a wholly-owned asset of an arm of Saudi Aramco.

new game's picture

can we export the pollution and byproducts to? or at least charge for it. huh, i want my royality for shittier quality of health even if a nickel a day...

DeathMerchant's picture

Which should now be seized by the state.

sodbuster's picture

Yep- US- founded by genius'- run by thieving idiots.

MFL8240's picture

Probably losing money on the exports because it is being offset by bribes?

bada boom's picture

I wonder what the june trade deficit would have been without these numbers.

Old_European's picture

"...Amsterdam, Rotterdam and Antwerp,... are located in the Netherlands...": you should study your geography. Antwerp is NOT located in the Netherlands, it's located in Belgium.

Lady Jessica's picture

The writer is presumably American.  You should be grateful that they know any of these cities are in Europe.

a Smudge by any other name's picture

crude is in fact an American export. Native American is polite.

ACES FULL's picture

They are ALL just future bombing targets. Sooner or later everybody gets a dose.

rayo_xis's picture

Correct. But the "trading hub" is in the Netherlands.

Rainman's picture

Close ... it was 9.4M bbls/day imported by USSA in 2015 for all petro products from 82 countries. Happy fact : OPEC deserves this slow death.

venturen's picture

The Marshal Island...yep that is completely legit!

bid the soldiers shoot's picture

Buy the oil from he US cheap.

Sell it back to them at big profit.

bid the soldiers shoot's picture

 

Introducing Kwajalein Atoll/Marshall Islands      

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Nowhere in Micronesia is the US military presence so pronounced as on Kwajalein Atoll, a US$4 billion space tracking and missile defence facility operated by the US Department of Defense.

Measured by lagoon size Kwajalein is the world's largest coral atoll, its 97 islands surrounding an immense 2175 sq km body of water. The original main base for the US nuclear test programme, and an essential component in the development of the 'Star Wars' missile defence system, Kwajalein has been at the heart of US weapons of mass destruction development for nearly 60 years. The lagoon, sometimes described as 'the world's largest catcher's mitt', is the target and splashdown point for intercontinental ballistic missile tests (ICBMs); many come from the Vandenberg Air Force Base in California, 6760km away, a distance covered in under 40 minutes. The Kwajalein Missile Range (officially called US Army Kwajalein Atoll, or USAKA) includes Kwajalein Island to the south, Roi-Namur Island in the north and some smaller islands between the two. Two-thirds of the lagoon is termed the Mid Atoll Corridor, and access to this area is severely restricted.

Read more: http://www.lonelyplanet.com/marshall-islands/kwajalein-atoll/introduction#ixzz4H8de1wOp

cowdiddly's picture

500K barrels a day Pffffft. What's that, like running LA for 8 hours? Exports. LOL

sudzee's picture

The US needs to maintain imports from the ME in order to keep US$ flowing. No US$, arms exports would shrivel and doe. 

Strelnikov's picture

We shouldn't export a drop until we no longer have to rely on OPEC members, such as those goddamn Saudis.

draego's picture

If we are going to sell our oil instead of consolidating it all in the name of "energy self-sufficiency", then there should no longer be any eminent domain for pipelines, etc. As someone who was impacted by the Keystone pipeline, it angers me to see the oil companies crapping all over us civilians in the name of energy self sufficiency, and then they just go and sell it for profit.

salman's picture

What is that little arrow sign in front of UK's 1k figure.

Just a little curiosity.

Crush the cube's picture

And Curacao belongs to the Netherlands, they have a military presence, last I saw it was a Shell logo painted on the refinery, matters jack who runs it.  Who's been buying up Fed paper lately?