Watch out: US crude cargoes are reshaping the world’s oil market
Few months after the lifting of the 40-year ban US oil exports, the country’s crude is flowing to virtually every corner of the market and reshaping the world’s energy map. Exports which began with small cargoes have been picking up speed with big oil companies like ExxonMobil and China Petroleum joining independent traders such as Vitol Group and Trafigura in exporting US crude oil. Exxon in early March became the first major US oil company to ship American crude from elsewhere, sending the Maran Sagitta tanker from Beaumont, Texas, into a refinery it owns in Sicily, Italy.
The US export activity is helping to support spot oil prices in some markets relative to contracts for later delivery though the US is likely to remain for the foreseeable future a small exporter compared with OPEC giants Saudi Arabia, Iran and Iraq and non-OPEC producers Mexico and Russia.
One reason behind the rise in exports is cheap pipeline and railway fees to move crude from the fields in Texas, Oklahoma and North Dakota into the ports of the US Gulf of Mexico. Another is that US oil prices have been trading at a discount to Brent crude, allowing traders to move oil from one shore of the Atlantic to another at a profit.
The exports could relieve pressure on storage capacity in the US after stockpiles rose to the highest level in official data going back to 1930.
The export ban was imposed in the aftermath of a 1973 to 1974 oil embargo by the Arab members of OPEC, the Organization of Petroleum Exporting Countries. It crippled the U.S. economy and highlighted its dependence on imports. Before it was lifted, the US sold as much as 500,000 barrels a day overseas, from Alaska and a few other origins allowed under federal law.
From Asia to Europe
Oil tankers laden with US crude are heading to countries including France, Germany, the Netherlands, Israel, China and Panama. Oil traders said other destinations are likely, just as supplies in Europe and the Mediterranean region are also increasing.
Chinese refiner Sinopec Corp has also bought US crude, to be loaded from a Gulf Coast port in March. Phillips 66 has likely shipped out its first US crude cargo, which is set to arrive into Singapore next month.
Japan will receive its second crude cargo from the United States in May since Washington lifted a four-decade ban on crude exports. This will follow the arrival in April of Japan’s first crude cargo from the United States, bought by Cosmo Oil Co earlier this year, indicating a growing willingness among Asian refiners to experiment with new grades as they seek to diversify their feedstock sources away from the Middle East.
The May shipment will be from Phillips 66. Phillips 66 has sold a Panamax-sized cargo likely to Japan’s TonenGeneral. To meet this rising demand, Phillips 66 has been actively marketing US crude to Asian buyers since Washington lifted the export ban, joining a string of trading houses who are taking advantage of the relatively new arbitrage.
Japan usually gets more than 80 percent of its crude from the Middle East. But Cosmo and TonenGeneral, which have bought US condensate previously, are among the more adventurous Asian buyers who are willing to experiment with new grades.
From major importer to competitor
US used to be the highest importer of Nigerian crude. According the Nigerian National Petroleum Corporation (NNPC), crude export from Nigeria to US fell by over 90 percent between 2012 and 2013. Until 2012, the US accounted for the 22.19 percent of the total crude oil exports in Nigeria but in December 2013, this percentage decreased to 2.23 percent.
As at 2015, according to the Nigerian National Petroleum Corporation (NNPC) data, India has emerged the highest buyer of Nigerian crude with 127,566,029 barrels for January – October 2015, representing 19.95 percent followed by Netherlands with 102, 215,314 barrels (15.99 percent), Spain with 67,061,382 barrels (10.49 percent), France 43,994,660 (6.88 percent) while US crude import from Nigeria was 15,781,654 barrels (2.47 percent).
Apart from its low import from Nigeria which may eventually fade away, US crude is in direct competition with Nigeria; both are light and they seem to focusing on Asia and European markets. While at the moment, direct threat from US crude may not be significant but tanker by tanker US crude cargoes are reshaping the market.
FRANK UZUEGBUNAM