US crude exports hit record post-Harvey
New York, 27 September (Argus) — US crude exports reached 1.5mn b/d last week, breaking the previous record of 1.3mn b/d set earlier this year in the week ending 26 May, as a glut of light crude in the Gulf coast following Hurricane Harvey improved export economics.
Most of the exports have been heading to Asia, with charterers including South Korea's SK Energy, Japan's Cosmo and China's Unipec, and traders such as Trafigura, Vitol and Mercuria, according to shipbrokers.
Suezmaxes, which carry 1mn bl cargoes, have emerged as the dominant vessel type along this long-haul route. This is partially because of they are mid-size which offers discharge flexibility and because VLCC availability in the Gulf of Mexico has been limited. Some US crude is also moving to Europe and toward the Caribbean, although typically on smaller vessels such as Aframaxes.
An important driver for the elevated exports volumes is higher discounts for US crude among foreign buyers amid an abundance of US crude along the Gulf coast.
The Brent-WTI spread has averaged $6.11/bl since 24 August, more than double the average in the period from the beginning of the year to that date. Prior to 24 August, the spread had not once reached above $5/bl since August 2015.
The wider spread since the end of August is mainly because of weakening demand following Hurricane Harvey, which has pressured WTI prices, said an oil analyst.
Flooding following the hurricane, which made landfall on the Texas coast in late August, knocked out nearly a quarter of total US refining capacity, leading refiners to process less crude.
But the spread had been widening prior to the hurricane. Non-hurricane related factors contributing to this trend are rising production in the Permian, which is weighing on WTI prices, and the possibility of an extended Opec production cut, which is supporting Brent.