US exported 2mn b/d of crude oil in 2018

In 2018, US exports of crude oil rose to 2mn b/d, nearly double the 1.2mn b/d rate in 2017, according to the US Energy Information Administration (EIA). Export volumes by destination changed significantly during the year, as US crude oil exports to China fell and exports to other destinations such as South Korea, Taiwan, and Canada increased.

The rise in US crude oil exports was the result of increasing US crude oil production and infrastructure changes. US crude oil production climbed 17% to 10.9mn b/d in 2018, with US Gulf Coast states – the departure point for more than 90% of the country’s crude oil exports – producing 7.1mn b/d. The increased production was mostly of light, sweet crude oils, but US Gulf Coast refineries are configured mostly to process heavy, sour crude oils. This increasing production and mismatch between crude oil type and refinery configuration led to more US crude oil production to be exported.

In early 2018, the Louisiana Offshore Oil Port (LOOP) in the Gulf of Mexico was modified to enable the loading of vessels for crude oil exports. LOOP is currently the only US facility capable of accommodating fully loaded very large crude carrier (VLCC) vessels capable of carrying approximately 2mn barrels of crude oil.

According to the EIA’s latest analysis, Asia was the largest regional destination for US crude oil exports in 2018, followed by Europe, while, as in previous years, Canada was the largest single destination for US crude oil exports. Canada received 378,000 b/d of US crude oil exports, representing 19% of total US crude oil exports in 2018. South Korea surpassed China to become the second-largest destination for US crude oil exports in 2018, receiving 236,000 b/d compared with China’s 228,000 b/d.

However, the EIA notes that the distribution of US crude oil exports by destination varied significantly from 1H2018 to the second half. In 1H2018, the US exported 376,000 b/d of crude oil to China, which made China the largest single destination for US crude oil exports for that period. However, in August, September, and October of 2018, the US exported no crude oil to China. US crude oil exports to China resumed in the final two months of the year, but at much lower volumes. On average, the US exported 83,000 b/d of crude oil to China in 2H2018.

This is because, in the summer of 2018, as part of ongoing trade negotiations between the US and China, China temporarily included US crude oil on a list of goods potentially subject to an increase in import tariffs. Around that time, the difference between the international crude oil benchmark Brent and the US domestic price West Texas Intermediate (WTI) futures prices narrowed – Brent prices went from $9/b higher than WTI in June to $6/b higher than WTI in July.

The rapidly narrowing price discount of US crude oils versus international crude oils and the potential for higher import tariffs caused China’s imports of US crude oil to slow. As US crude oil exports to China fell, exports to South Korea, Taiwan, Canada, and India increased. Ultimately, the rate of crude oil exports to all destinations in the second half of the year (2.2mn b/d) was higher than in the first half (1.8mn b/d), according to the EIA.