US exporting oil and gas at record pace

No sign of slowdown as fear of peak oil supply vanishes and Europe, Asia show big appetite

HOUSTON • The world's largest oil consumer exported more hydrocarbons than ever before this year and shows no signs of slowing down.

You name it - crude oil, petrol, diesel, propane and even liquefied natural gas - all were shipped abroad at a record pace.

While the surge comes many years after the shale boom started, it can be traced back to the growth of horizontal drilling and fracking.

US exports are poised to expand even further, as the fear of peak oil supply has all but vanished just as a new demand threat emerges in the form of electric vehicles.

Americans are expected to end the year pumping oil out of the ground at rates unseen since the early 1970s. More and more of it is going overseas, giving the Organisation of Petroleum Exporting Countries a headache as the group restrains its own output.

Last year, the US tested export waters after a nearly four-decade-old ban was removed. But this year, purchases of US light, sweet crude have skyrocketed as pipeline and dock infrastructure was built out and the wider price spread between Brent and West Texas Intermediate (WTI) crude coaxed more cargoes abroad.

Canada, once the only regular buyer of US crude, is competing with refiners in Europe and Asia. China's appetite for American oil is voracious: In April, China bought more than Canada did for the first time.

"It's pretty amazing, really," said ClipperData's director of commodity research Matt Smith. "You learn to never say never in this market."

Of all the emerging trade flows this year, crude deliveries into Europe and Asia are most surprising, according to Mr Smith.

Brent crude, the European benchmark, has maintained at least a US$4-a-barrel premium to WTI since mid-August, and was US$6.31 more expensive on Tuesday. If the price of European oil stays suspended into the New Year - a good possibility after the Forties oil pipeline was shut to repair a crack - US exports will continue holding above one million barrels a day.

"The US has fully integrated itself into the global market," Mr Smith said. "You have US crude going into Europe, and European crude heading elsewhere because the US is selling crude into its own backyard."

The growth of US petrol and diesel exports was more subtle this year, mostly filling the gaps left as refiners in Latin America were not up to the task of meeting the region's growing thirst for fuel.

Refiners in the middle of the US were pumping out fuel at a record pace, leaving a surplus of refined products along the Gulf Coast ready to be shipped to eager Latin American buyers, according to analyst Mason Hamilton from the US Energy Information Administration.

July was a banner month for American refiners, which processed crude and exported distillate fuel at a record clip, according to monthly data. The strong demand from Latin America will continue into next year, said Mr Hamilton.

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A version of this article appeared in the print edition of The Straits Times on December 14, 2017, with the headline 'US exporting oil and gas at record pace'. Print Edition | Subscribe