The US Crude Export Chronicles: December 2019

Author Eunice Bridges, Senior Reporter and Amanda Hilow, Associate Editor

Last month we devoted the entire blog to the Port of Corpus Christi and its emergence as a key outlet for US crude exports. Why? Some big new pipelines — including Cactus 2 and Epic — started service to that port.

Blog post - The US Crude Export Chronicles: November 2019 

Welcome back to our monthly blog: The US Crude Export Chronicles by Argus senior reporters Eunice Bridges (@eunicebridges12) and Amanda Hilow  (@HilowMidpoint). Come back every month for  Argus’  take on US crude exports and how they are transforming global markets.

Hot topics 

Now, the growing spigot of crude to the coast has paved the way for our latest hot topic: record exports. That’s right, US crude exports hit a record high of about 3.4mn b/d in October, according to the latest Census Bureau trade data. And that number will likely continue to climb.

Keep in mind that the latest major pipeline from the Permian to Corpus Christi – Phillips 66’s 900,000 b/d Gray Oak pipeline, did not start initial service until late November, so expect more record highs as trade data is released in the new year. Gray Oak will also have destinations near Houston when it goes into full service in the first quarter of 2020.

In the pipeline

Lots of big midstream news lately as port expansions and crude carrier projects become the next frontier to move more US crude to global markets. Epic has loaded an Aframax-sized vessel with crude at its converted dock on the Inner Harbor of the Corpus Christi Ship Channel. Epic repurposed the former grain facility to export crude while a larger export terminal is under construction. The larger terminal will load Suezmax tankers and is expected to start service in the third quarter of 2020.

Further out on the water, we may be seeing the first signs of consolidation in the race to build offshore very large crude carrier (VLCC) ports. Enbridge is joining Enterprise’s project to develop a VLCC terminal off the coast of Freeport, Texas. The two companies have executed a letter of intent agreeing to negotiate a deal which would allow Enbridge to buy into the project after it receives a deepwater license from US regulators.

The VLCC projects tend to have catchy names and the Enterprise port is no exception – going by “SPOT” which is short for Sea Port Oil Terminal. Enbridge is also part of a competing project with Oiltanking with another memorable name, Texas Colt — short for the Texas Crude Offshore Loading Terminal. Enbridge said that it will work to market and seek customers for SPOT first "while positioning Texas Colt or a similar project to proceed in the future if the export market grows to require it." 

Census surprise

October was a month of many records for US crude exports. Not only was total volume at its highest since export restrictions were first lifted in December 2015, but monthly shipments also hit record numbers to six individual countries.

Exports to France nearly tripled from September to hit roughly 215,000 b/d, marking the country as the sixth top importer of US crude as refiners like ExxonMobil subsidiary Esso and UK-Chinese joint venture PetroIneos doubled down on WTI and Bakken liftings to the Fos-Lavera port complex. And Australia, home to BP’s 146,000 b/d Kwinana refinery, came in as the seventh top destination despite having just started purchases of US crude earlier this year.

Peru lifted more than 85,000 b/d of US crude for the first time, indicating the Latin American country is displacing pricier west African crude imports with more regional grades, such as WTI or Light Louisiana Sweet (LLS).

And smaller European nations Denmark, Israel and Belgium opted for US crude instead of North Sea options amid more economic price levels at the US Gulf coast.

Records hit in October 2019

 Total US crude exports  
   October volume September volume Previous record
  3.38 mn b/d  3.09 mn b/d  3.16 mn b/d (June 2019) 
 Monthly shipments per destination  
 Country  October volume September volume  Previous record 
 France 213,995 b/d  72,620 b/d  109,644 b/d (October 2017) 
 Australia 192,283 b/d  73,488 b/d  73,488 b/d (September 2019) 
 Peru 85,961 b/d 80,538 b/d  80,538 b/d (September 2019) 
 Denmark 69,779 b/d 19.109 b/d  45,819 b/d (April 2019) 
 Israel 24,363 b/d  23,249 b/d  23,529 b/d (May 2019) 
 Belgium 19,818 b/d  0.0  4,100 b/d (July 2019) 

Source: US Census Bureau

 

What’s next?

Alas, 2019 is coming to a close, and next year will start a new era. New International Maritime Organization (IMO) regulations will take effect on 1 January. Refiners are already sweetening crude feedstocks to include more US shale ahead of the new rule, which will tighten the permitted sulfur content in marine fuels to 0.5pc from 3.5pc from January next year.

With demand for US exports on the rise, many are wondering about the future of the number one basin for exports – the Permian.

On that note, here is a link to a recent Argus webinar on that very topic, titled Permian Basin: Reaching a tipping point?

We also want to remind you that the Argus Americas Crude Summit is coming up in early February. More information on that Houston conference here.

We hope to see you again for next month’s analysis on US crude export flows and dynamics. Until then, smooth sailing.

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