US crude exports set to double by 2022

US crude exports could grow from current levels of 2.9mn b/d to nearly 6mn b/d by 2022, according to a new forecast from Rystad Energy.

With US production expected to increase by 1.2mn b/d year-over-year (y/y) in 2020, and with domestic refineries already maxing out capacity to absorb shale growth, the market analyst expects exports to balloon and reach 4.7mn b/d by the end of 2020 and nearly 6mn b/d by the end of 2022.

‘Crude exports will grow on the back of new infrastructure coming online in Corpus Christi, Texas, as international crude buyers ramp up efforts to diversify their import sources after the attacks on oil facilities in Saudi Arabia and overall rising tensions in the Middle East,’ comments Paola Rodriguez-Masiu, a senior analyst on Rystad Energy’s oil market team.

US crude exports slowed significantly in 3Q2019 after reaching a record level of nearly 3.2mn b/d in June 2019. This recent slowdown related in part to the narrowing of the Brent-WTI price spread, along with headwinds from the 5% tariff imposed on US crude by China, the third-largest buyer of American crude year to date. However, Rystad Energy forecasts that crude exports will rebound to an unprecedented 3.7mn b/d during 4Q2019, before climbing to even higher levels.

‘This surge in crude shipments from the US will be made possible by a flurry of new pipeline and export terminal infrastructure coming online in the coming years,’ Rodriguez-Masiu adds.

While the US has only one port capable of fully loading very large crude carriers (VLCCs), some 38% of US crude exports are ultimately loaded onto such carriers as they are the most cost-efficient for long haul destinations. To achieve this, exporters load most of their volumes through a complex, time-consuming and costly process known as reverse-lightering, which involves small-sized tankers being loaded at onshore ports to subsequently fill bigger tankers off the coast.

Rodriguez-Masiu notes: ‘In order to reduce the need for expensive reverse-lightering operations, midstream investors have poured resources into deepening the draft of the existing onshore terminals to allow partial loading of VLCCs. But to maximise loading efficiency, deeper ports are needed offshore that can enable VLCCs to be fully loaded.’