US crude exports are increasing
OREANDA-NEWS. US crude exports are increasing as domestic production remains at record-level highs and global demand rises, and customs data indicate destinations are becoming more diverse.
In the first four months following the lifting of 40-year-old restrictions on crude exports in December, movements to places other than Canada totaled 19mn bl, official data show, up from 5.2mn bl in the same period of 2015. The primary destinations were to Venezuela and the Asia-Pacific.
In the first month after the ban was lifted, Canada held around 91pc of the market share for US exports, decreasing to less than 52pc by April. Canada's incoming crude portfolio consisted of only 53pc of US crude in the first four months of the year, a relative decrease from some 63pc during the same period of 2015.
US production and crude storage remain at elevated levels, with output averaging 9.15mn b/d in the first quarter of 2016, down slightly from 9.5mn bl/d in 2015 but 10pc or more higher when compared with every year prior since 1986. US crude stocks achieved an 86-year record of 532.5mn bl in March, according to the latest available data by the US Energy Information Administration (EIA).
Venezuela leads in US crude imports so far with just over 6mn bl moving through the Curacao port, where Venezuela's state-run oil company PdV runs its blending facility, from January to April. The second-largest consumer of US crude during that time was Japan, receiving 2.63mn bl. The Netherlands followed with 2.55mn bl imported.
The Marshall Islands also ranks high on the list, coming in as the fourth-largest importer of US crude with 2.1mn bl imported. The Pacific atoll nation has an offshore floating storage site, although where the crude ultimately goes is not clear because the country's own customs data are not readily available.
Decreasing freight rates and, in effect, more competitive crude prices have made the importation of US crude more economical. The average benchmark crude prices in April 2016 for West Texas Intermediate (WTI) and Brent were $41.10/bl and $43.34/bl, respectively. The estimated delivery cost for US light sweet crude to Venezuela was about $43.50/bl that month, or about 50?/bl cheaper than alternative west African grades like Bonny Light that the Latin American country formerly relied upon.
Venezuela's demand for US crude remains strong as it seeks to obtain alternatives to blend with domestic Orinoco heavy crude. In 2015, PdV was forced to begin imports of foreign light sweet crudes to replace its dwindling supply of 32°API Mesa. These imports have become important in allowing PdV to continue producing 16°API Merey, one of the most popular Venezuelan export grades.
But the future of Venezuela's US crude imports remains at risk because of ongoing political tensions and recent economic downturns, which some analysts have said could rob PdV of its ability to make purchases.
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