US crude exports on the rise

OREANDA-NEWS. July 11, 2016. US crude exports to destinations other than Canada are increasing following the lifting of restrictions late last year.

The US exported nearly 160,000 b/d of crude and condensate to destinations other than Canada in the first four months of this year, up from just over 40,000 b/d of mostly condensate in the same period a year earlier, US customs data show. The increase followed Washington's decision to lift 40-year-old restrictions on crude exports in December.

At least 35,000 b/d of this year's exports are estimated to be condensate. US exports are mainly made up of light sweet WTI, Eagle Ford and Bakken crudes, as well as sour Alaskan ANS and Gulf coast grades. Exports have principally loaded at Houston and Corpus Christi terminals in Texas.

Venezuela was the biggest importer behind Canada, taking 50,000 b/d in January-April to Curacao in the Caribbean, where state-owned PdV leases the 325,000 b/d Isla refinery and has crude and products storage facilities. Venezuelan demand for US crude has risen as it seeks alternative lighter grades to blend with domestic heavy Orinoco crude against a backdrop of declining 32°API Mesa production. BP has been among the sellers. PdV blends light sweet crude imports with heavy Orinoco crude in Curacao to produce the 16°API Merey grade, which is favoured by Chinese importers.

But financial difficulties could undermine PdV's ability to pay for imports. Payment and infrastructure problems led to a backlog of 83 tankers waiting off PdV terminals in Venezuela and Curacao last month.

The Netherlands was the third-largest export destination, taking just over 20,000 b/d in the first four months of this year. This consisted mostly of condensate shipped to Rotterdam, where Koch has an 80,000 b/d condensate splitter, or for refiners to blend with heavier crudes. Elsewhere in Europe, crude and condensate went to buyers in Italy, France, the UK and Switzerland. April-loading US crude shipments weighed on European demand for light sweet Caspian and Nigerian crudes.

Japan was another key buyer, taking nearly 15,000 b/d. Japanese refiner Cosmo Oil bought 300,000 bl of crude and 700,000 bl of condensate from Houston in March for delivery to its 132,000 b/d Yokkaichi and 220,000 b/d Chiba refineries. BP also looks to have sold May-loading ANS to Japan. And China took just under 10,000 b/d in January-April.

The Marshall Islands ranks high on the list, but is unlikely to be the final destination for the shipments, given that it has no refineries. The final destination of these exports is unclear.

Short selling

US crude exports are benefiting from interest from Latin American refiners, which use light sweet crude imports to blend with their heavy oil output. At least 1.14mn bl of US Domestic Sweet Blend is expected to be delivered to Peru at the end of July, and Colombian state-controlled Ecopetrol is evaluating US crudes for future imports. Latin America could prove to be a major market for the US given the relatively short shipping distances involved and expected declines in Colombian and Mexican output.

Canada was the main destination for US crude imports in January-May, taking nearly 300,000 b/d, down from over 460,000 b/d a year earlier. Canada imports US crude to supply the east of the country, which lacks the necessary pipeline and rail infrastructure to receive oil from western Canada. But Canada has sought to diversify supply and is taking crude from further afield, including Nigeria.

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